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He who filches your good name Identity
theft isn"t likely to lighten your purse by much, by
Aaron Chambers Daniel Parrilli created his own little business. He even created the customers. Parrilli applied for credit cards in fictitious names. Then he set up a sham company and secured a credit card terminal. He processed transactions through the terminal using the bogus cards and deposited the sales credits into bank accounts set up with the aliases. For a while, he paid minimum balances on the cards to keep them in good standing. By the time investigators caught up with Parrilli two years ago, he had raked in an estimated $600,000. He had purchased property, vehicles and a boat for himself and his family. “It never ceases to amaze me the ingenuity of people in how far they’ll go to create schemes,” says Victor Demtschenko, a postal inspector who investigated the case. “The effort that’s put forth by some white-collar criminals is amazing. This guy, besides working a full-time job, was full-time involved in fraud.” Parrilli was diligent at executing his schemes. In his Carol Stream home, investigators found files for each of the fictitious identities he had created, complete with corresponding credit cards — about 250 — and copies of credit card applications. “He had backup documentation for everything, which was really nice for us,” Demtschenko says. Parrilli had worked as a credit manager for a major department store. When he left that job, he took some 30 credit reports. He then paired Social Security numbers from those reports with phony names, creating the 24 aliases he used to get the credit cards. One of his victims complained to the Social Security Administration that his Social Security number was being used by somebody else. That led the agency’s investigators, and those of the U.S. Postal Inspection Service, to Parrilli. “We know of at least one individual whose credit history was so badly damaged by what [Parrilli] did that he had to get a new Social Security number and start all over,” says Edmond Chang, the assistant U.S. attorney prosecuting the case. Next month, Parrilli is scheduled to appear in federal court for sentencing. He pleaded guilty to unlawful possession of credit cards with the intent to defraud, mail fraud and bank fraud and faces up to 45 years in prison and $750,000 in fines. Parrilli’s attorney, David Centracchio, didn’t return a phone call for comment. But Demtschenko offered this limited praise for Parrilli’s technique, if not his work: “It was primarily identity theft that he did, and he was damn good at it.” Identity theft, a type of financial fraud that has garnered great publicity lately, is real. And it’s growing. Enterprising criminals have turned to stealing people’s names and personal identifiers in an effort to make easy money. While the monetary losses incurred by identity theft victims usually are relatively small, those victims nonetheless must spend time — years, in some cases — and dollars to clear their credit ratings. In some cases, they must fight to clear criminal records created in their names. As some in the law enforcement community loosely put it, these victims are often presumed guilty, and it’s up to them to repair their reputations. Using somebody else’s identity to commit fraud is nothing new. But these days, personal information is more readily available through such electronic means as the Internet. The technology available to thieves is more sophisticated, and credit card companies are more aggressive in their marketing campaigns — filling mailboxes across the country with preapproved plastic that can readily be stolen. While banks and other financial institutions are launching efforts to educate their employees and the public about the risks of identity theft, lawmakers in Springfield and Washington, D.C., are crafting legislation designed to make it more difficult for criminals to tamper with other people’s identities, and to provide stiffer penalties when they do. There’s good reason. The Federal Trade Commission, which fields complaints about identity theft, calls it the No. 1 consumer fraud complaint nationwide. State and federal law enforcement officials say they are seeing more cases, and that the schemes are growing more elaborate. For reasons that aren’t clear, Chicago ranks No. 2 in the nation for identity theft complaints per capita. John Mahoney, deputy supervisor of the governmental and financial crimes unit at the Cook County state’s attorney’s office, calls identity theft the fastest growing white-collar crime. “Nobody needs to go out and do a stickup anymore,” he says. “With the stroke of a pen, you can steal a hundred times more than in a typical armed robbery. So people are in that game.” In fact, the trade commission reported in January that identity theft accounted for 42 percent of consumer fraud complaints last year. Other categories included Internet auctions (10 percent), Internet services and computer complaints (7 percent) and shop-at-home and catalog offers (6 percent). In Illinois, identity theft comprised 49 percent of consumer fraud complaints last year, according to the commission. There were 3,784 identity theft complaints in this state, 1,453 of them in Chicago, 61 in Naperville, 46 in Evanston, 46 in Oak Park and 45 in Aurora. Most identity theft complaints in this state — 1,647 — were related to credit card fraud. The remaining complaints were related to unauthorized phone or utility services (844 complaints), bank fraud (469), employment fraud (406), loan fraud (293) and government documents or benefits fraud (263). The trade commission put 945 complaints in the “other” category. “Generally speaking, identity theft isn’t a stand-alone crime,” says Robert Gray, a special agent with the U.S. Secret Service and spokesman for the service’s Chicago office. “They’re going to use that crime to springboard into other crimes, whether it be credit card fraud, access device fraud, bank fraud, what have you.” The General Accounting Office, Congress’ investigative arm, is wrapping up its report on identity theft. Richard Stana, director for justice issues at the GAO, was researching the report, which was expected to be published in late February or early March. While Stana wouldn’t discuss his conclusions, he shared some statistics he had gathered during prior research. Among them: Only Washington, D.C., beats Chicago in complaints of identity theft per capita. Chicago is followed by Houston and Los Angeles. Stana wouldn’t speculate on why these cities made the top of the list, and key law enforcement officials in this state and in federal posts were stumped when asked to explain Chicago’s ranking. But a few ventured guesses. Chicago is the nation’s third-largest city, but the rating is calculated per capita, so size doesn’t matter. Chicago also has a strong information technology community, flush with tech-savvy entrepreneurs, so that city’s residents might be prime candidates for identity theft. Stana also was willing to offer statistics on the most likely targets of fraud. About 25 percent of identity theft victims, he says, are between the ages of 19 and 30, and about 50 percent are ages 31 to 50. Fewer complaints than might be expected come from seniors and teens. “I guess it’s like the old Bonnie and Clyde thing. Why do you rob banks? Because that’s where the money is.” Moreover, Stana says, all indicators show that identity theft is growing. “It’s almost the perfect crime of the 21st century because we live in an information age where your personal identifiers — your name, Social Security number, date of birth, mother’s maiden name — are probably more valuable than your wallet or your purse,” he says. “They open up the possibility of a financial crime that exceeds what most people would ever carry around with them, or even keep in their house.” Still, he notes that in most identity theft cases the amount of money the victim loses is relatively nominal. In most instances, either the financial institution or the merchant makes up the loss. (Of course, those losses are passed on to consumers in the aggregate.) VISA, for example, has a zero liability policy, meaning it and/or the issuing bank will cover 100 percent of a card holder’s loss due to identity theft. Thomas Kelly, a spokesman for Bank One, the largest issuer of VISA credit cards, says such protections make identity theft more frustrating than anything else. “There are hurdles you have to work through, but you probably will not be hurt financially,” he says. Still, victims of identity theft complain about feeling violated, much as they would after being mugged. “It’s not so much that they were out thousands of dollars, although there are a few cases like that, but it’s just this sense that somebody’s got their name, somebody’s using their good name, and that’s a real uneasy feeling,” says Stana. And there’s the headache of trying to repair credit and getting the state to absolve any criminal record that was created in the identity theft victim’s name. According to a report released in 2000 by the Privacy Rights Clearinghouse and the California Public Interest Research Group, identity theft victims spend an average of 175 hours and $808, not including legal fees, in their efforts to clean up their credit ratings. Fifteen percent of the respondents said they were under criminal investigation or had warrants for their arrest as a result of the identity theft. Some fraud schemes are relatively straightforward, while others, like Parrilli’s credit card scam, are more elaborate. Fast becoming one of the most common types of identity theft, according to law enforcement officials, is a practice called “skimming.” In a typical case, a restaurant waiter swipes a customer’s credit card through a “skimmer,” a handheld electronic device about the size of a pager, when he or she processes the customer’s check. The skimmer then stores all the identifying information that is contained on the card’s magnetic strip, including name and account number. (A skimmer can be purchased over the Internet for $200 to $300.) Later, the names and account numbers are downloaded to a computer, where they can be copied onto other, generic cards and used to make purchases. Even without a generic card to hold the information, the identity thief can use the card holder’s information to make purchases over the phone or the Internet. Law enforcement officials describe even more complex schemes involving forged documents, such as death certificates. Such a case could involve using the identity of a recently deceased person to get credit or a loan. It can take months for the three major credit bureaus, Equifax, Experian and Trans Union, to learn of a death. Some scams get more outrageous. In January, the Illinois attorney general’s office indicted four people in connection with an alleged scheme to defraud mortgage lenders by buying nine dilapidated properties — all but one on Chicago’s South Side. The foursome allegedly secured mortgages in other people’s names and directed the borrowed funds to themselves, as property sellers, then tried to run with the money. The fraud was worth nearly $1 million. Edward Carter, assistant bureau chief of the financial crimes unit at the Illinois attorney general’s office, says two of the indictees worked for a mortgage broker and sent completed loan packages to the mortgage lenders. He says those packages were filled out with stolen or bogus names and the purported borrower’s personal information, such as work history. “What’s happened here is the mortgage lender’s first line of defense, the mortgage broker, has been breached because there’s nobody doing the quality control to ensure that the lender was getting real people who were credit-worthy,” Carter says. “So those packages would get sent over there, the loan would be approved and there would be a closing set up. And [the indictees] would simply recruit some people and pay them to show up at the closing as [buyers].” He says the lenders then would issue checks for the property to the sellers, the indictees. Thomas Fazy, Julie Fazy, Craig Hendricks and Ruben Walden were charged with conspiracy and theft. Fazy, Fazy and Hendricks also were charged by the attorney general with forgery. In mid-February, Fazy, Fazy and Walden were still at large, with warrants pending for their arrests. Hendricks surrendered; his attorney, David Daudell, didn’t return a phone call for comment. Mahoney, the Cook County prosecutor, says identity thieves tend to work in groups, though their efforts don’t exactly qualify as “organized crime.” That term usually refers to a single individual who controls criminal operations for a large geographic area. Identity thieves, he says, work in “little guerrilla bands that operate two, three, four, sometimes 10 together in coordinated activity.” Still, the law enforcement community has a similar approach to both types of operations: Target the boss. Mahoney says packs of identity thieves tend to operate around a single person at the center of the conspiracy. In a typical case, he says, the boss gathers information regarding people’s financial identities from co-conspirators then uses the co-conspirators to exploit the information using sham credit cards or checking accounts. The co-conspirators are paid for their assistance. “And then, if you can find the person who is making the counterfeit credit cards and you can find the person who is making the counterfeit checks, you cut the head off the conspiracy,” he says. Meanwhile, lawmakers are trying to keep up with the thieves. State Sen. Lisa Madigan, a Chicago Democrat and candidate for attorney general, is sponsoring legislation to prohibit merchants from printing a credit card holder’s full account number on receipts. The aim is to prevent identity thieves from getting their hands on the information. Another measure sponsored by Madigan would permit victims of identity theft to have credit reporting agencies freeze their credit files. It also would require the agencies to tag such files with “consumer alerts.” Yet another bill pending in the Senate is aimed at skimming, the practice of copying credit cards with a handheld device. Under that measure, using such a device without the cardholder’s permission would become a felony. That proposal is sponsored by Sen. Kirk Dillard, a Hinsdale Republican, and is backed by the Illinois Retail Merchants Association. At the same time, reports of identity theft have helped fuel an effort in Congress to standardize identification cards in every state. U.S. Sen. Dick Durbin, a Springfield Democrat, is working with the American Association of Motor Vehicle Administrators on legislation that would make driver’s license security features uniform. Durbin says there are three key components to his effort: ensuring that applicants for driver’s licenses or other forms of state identification present adequate proof of identity; requiring all licenses and identification cards to display certain information, while making them more difficult to copy or forge; and, ultimately, integrating motor vehicle systems to prevent someone who has been denied a license in one jurisdiction from simply going to another. Still, Illinois prosecutors say they are comfortable fighting identity theft with state laws that are already on the books. In fact, one 1999 state law to combat financial fraud through the theft of identifiers or documents has gone largely unused. Prosecutors say they favor other state laws, such as one aimed at forgery, in their prosecution of identity theft crimes. They say the forgery law is sufficiently broad for their purposes and, unlike the identity theft law, has been tested and refined in court. In interpreting that law, Illinois courts have held that the essence of forgery is knowingly making a document that is apparently capable of defrauding another with the intent to defraud. That interpretation would fit many cases of identity theft — knowingly making a document with the intent to defraud. “All of these things that are today called identity theft almost could be charged as theft by deception, forgery, computer fraud, wire fraud or mail fraud,” says Carter of the Illinois attorney general’s office. “Those laws are just as effective, if not more effective, than the new identity theft statute. And one reason we like the old statutes is there’s already case law so we know what the statutes really mean.” In addition, prosecutors say a host of other state laws tailored to fit specific crimes are useful in identity theft cases. The Illinois Credit Card and Debit Card Act, for example, provides penalties for using false information to apply for a credit card and for using another person’s credit card without permission. One point to keep in mind, though: Using a hodgepodge of statutes to prosecute identity theft makes tracking instances of the crime, and painting an accurate picture of it, difficult. “There’s really no common definition that everybody subscribes to, and because it often is charged as part of another crime, it’s tough to get good statistics and to track incidence and prevalence and cost,” says Stana, of the General Accounting Office. “It historically hasn’t been tracked discretely.” In addition to law enforcement and legislation, there are other efforts afoot to curb the rising incidence of identity theft. As the saying goes, education is the key. The Illinois Bankers Association, one organization fighting the crime, offers a wealth of information on identity theft to its member banks. In June, the group’s annual meeting will feature a lecture on identity theft by Frank Abagnale, an ex-convict-turned-consultant. In his youth, Abagnale traveled the world impersonating people and writing more than $2.5 million in bogus checks. After five years in prison, he began work as a consultant for the Federal Bureau of Investigation — a job he still holds. In addition, he has written two books, one about his life as a crook and the other an overview on fraud. Abagnale says consumers need to look out for themselves when it comes to identity theft. For starters, he says, they should limit the personal inform-ation they divulge and carry. “Today you have to do your own research, you have to be a little smarter, you cannot rely on the government, laws or police to protect you,” he says. As for legislation, the ex-con would tighten privacy laws so that personal information is less accessible. He’s not impressed with such efforts as Durbin’s to standardize identification cards and make them harder to forge. “A system is only as good as the $6-an-hour clerk who is operating it,” Abagnale says. “Anyone who believes any system today is foolproof has failed to take into consideration the creativity of fools.” Illinois Issues, March 2002 For information about how to subcribe to Illinois Issues go to: Go to Illinois Issues blog at http://illinoisissuesblog.blogspot.com/
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