Indictments were made public Thursday in a multimillion-dollar cellphone trafficking conspiracy that recruited homeless people to buy smartphones that were shipped to Hong Kong and sold on the street for as much as $2,000.
Federal authorities in Minneapolis said the nine people indicted engaged in identity theft to create the false identifications for their buyers, then used an employee in a Target store to make sure the stolen identity would clear a credit check when the cellphones and contracts were purchased.
The conspiracy was allegedly led by Zibo Li, 30, of Golden Valley, who made a first appearance in U.S. District Court on Thursday afternoon in front of U.S. Magistrate Janie Mayeron, along with the eight others who were also indicted by a federal grand jury. With the concurrence of the U.S. attorney's office, all were released on an unsecured bond of $25,000, but with numerous provisions to ensure their future appearances.
The nine conspirators — seven men and two women — trafficked in at least $3.8 million in stolen cellular devices. However, based on the personal financial information the defendants gave Mayeron in court Thursday, she appointed federal public defenders to represent most of them.
Li was represented by attorney Allan Caplan, who said Joseph Tamburino, his partner, will be handling the case. Tamburino said he had not seen the indictment and had no comment.
Federal authorities said that none of the homeless people were being charged.
"They exploited vulnerable members of our society, including people residing in homeless shelters, to steal phones and turn a profit," said Assistant U.S. Attorney Manda M. Sertich.
Authorities call the scheme "credit muling." Three buyers, who served as middlemen, recruited people to obtain cellphone service plans, which made them eligible to buy reduced-cost phones.
A large portion of the cost of the smartphone is usually paid in monthly installments added to the phone bill. However, under the alleged scheme, the buyers walked away from the service contract but kept the phone, which was then sold to the middlemen for a profit.
Three other co-conspirators provided the stolen identities.
Elijah Wayne Jackson, 21, of St. Paul, working for Target, allegedly ran credit checks on the stolen identities in advance to make sure that the buyers would be cleared to get cellphone service contracts and obtain the phones, documents say.
Two other alleged conspirators, Ifrah Nor, and Randolph K. Williams, "used identifying information of a Twin Cities-area business" to apply for business cellphone contracts and were then able to obtain far more low-cost phones than an individual account, the authorities said.
Li was said to be at the heart of the conspiracy, buying the phones from go-betweens and reselling them in Hong Kong for "substantial profits."
The conspiracy started in about 2011 and continued until about 2014 in Minnesota and elsewhere, the indictment said.
The scheme unravels
Authorities began to unravel the conspiracy after the Secret Service office in Memphis learned that a large shipment of new cellphones was being sent to Hong Kong. The shipment was intercepted, and authorities discovered that many of the phones had been obtained through identity theft.
The shipper was identified as Li, search warrants were executed and law enforcement agents uncovered $100,000 worth of mobile phones, gift cards, prepaid cards, Chinese currency, U.S. currency, various consumer electronic items and other communication devices.
Sprint and AT&T told authorities that the phones shipped by Li had come from the Target store at 1744 Suburban Av. in St. Paul.
In February 2014, Marcus Coleman, who had obtained identities for the scam, was arrested by St. Paul Police Sgt. Charles Anderson. According to court documents, Coleman described elements of the conspiracy and the role of some of the people who were subsequently indicted.
The announcement of the indictment was formally made by U.S. Attorney Andy Luger and Louis Stephens, special agent in charge of the Secret Service in Minneapolis.
Stephens cited the role of the Minnesota Financial Crimes Task Force in investigating the alleged crime.
All nine suspects were charged with conspiracy to traffic in unauthorized access devices. Others were also charged with identity theft and two, including Li, were charged with fraud.
Besides Li, those listed in the indictment were: Williams, 27, Bloomington; Nor, 23, St. Louis Park; Jackson, 21, St. Paul; Derek Krez McCormack, 33, St. Louis Park; Temetrius Latonya Nickerson, 42, St. Paul; Reginald Demarius Washington, 23, Brooklyn Park; Omid Ngange Akale, 35, Minneapolis; Joseph Francis Werb, 37, Minneapolis.