Victims of check scam feel blindsided
As a Largo company painfully learned, once thieves have obtained bank routing and account numbers, they can easily commit fraud.
By HELEN HUNTLEY
Published July 25, 2005
The first hint of a problem was a Monday morning voice mail message from a Clearwater bar. The bar had cashed Timothy Carter's paycheck and wanted to verify his employment at Pyramid Aluminum.
"We don't have an employee named Timothy Carter," said Gail Popiolek, president of the Largo company. She rushed to the bar to pick up a copy of the check. While she was out, a similar call came in from a liquor store. And right after that, one came from a discount store.
Popiolek notified the bank, which bounced more than $50,000 worth of counterfeit checks that came rolling in. Soon, the companies that had cashed the checks began calling and writing Pyramid, asking for reimbursement.
"We're getting one heck of a black eye," Popiolek said last week, four weeks after the saga began. "We've been in business 26 years and never had anything happen like this. I'm paranoid to give anybody a check at this point."
As Popiolek discovered, the string of numbers that appears at the bottom of every check gives scam artists a direct path to your bank account. And it's not all that difficult for the criminally inclined to use it.
Popiolek doesn't know how the thieves obtained the company's information, but it could have been copied from any check it has issued. The thieves printed at least two dozen checks on a computer, using Pyramid's bank routing and account numbers.
"What makes it easy is we're in the computer age here," said John Joyce, special agent in charge of the U.S. Secret Service office in Tampa, which works with banks, law enforcement agencies and the postal inspection service to combat check fraud.
Office supply stores sell check paper, magnetic ink and software that can turn most any computer and printer into a counterfeiting operation.
"Many small businesses use a computer to make legitimate checks for their business," Joyce said. "The criminal element figured out a long time ago you could use it to make counterfeit checks of very good quality. All you need is somebody else's information to put on your checks."
And as long as you have the correct numbers, the other information on the check doesn't even have to be accurate. Some of the checks that hit Pyramid's account had the names and addresses of other companies. Some had the names of other banks. None of them had an authorized signature.
But because the numbers matched those of a legitimate account and the thieves had valid, though possibly stolen, driver's licenses to use as IDs, the checks cleared many retailers, even those employing sophisticated security screening.
Popiolek, who owns the aluminum fabrication business with her husband, Wayne, was shocked by how easy it was for the counterfeiters.
"They didn't even try to copy signatures from somebody here," she said.
Check fraud is a huge problem for banks and retailers, which try to stay one step ahead of the perpetrators. The American Bankers Association said its surveys of commercial banks show fraud attempts increased 33 percent during the past two years, but actual fraud losses dropped 3 percent.
"We see this as a dialogue with the street criminal," said Brian McGinley, director of loss management for Wachovia Bank. "They're testing to see how they can be successful, and we're putting in countermeasures."
Banks use computer software to screen for anomalies, such as checks that are unusually large, unusually numerous or out of sequence. That technique is more difficult to apply to businesses, he said, because they write checks ranging from the very small to the very large.
One of the most effective fraud deterrents that businesses can use is a verification system known as positive pay, McGinley said. Participating businesses give their banks computer files of the checks they issue so the banks can match check numbers and amounts before authorizing payment. Some of the more advanced systems use optical character recognition technology to match the name on a check's payee line against the computer list, he said.
But many small businesses' accounting systems don't operate at that level of sophistication, leaving them more vulnerable.
Retailers are the first line of attack in many cases of check fraud, including the one involving Pyramid. The situation has created a business for companies such as St. Petersburg's Certegy Inc., which provides check verification and guarantee services. If a check Certegy approved for a retailer turns out to be fraudulent, Certegy takes the loss.
"You try to make it as difficult as possible so only the most sophisticated guys who are spending a lot of money can have a chance of beating your system," said Jeff Carbiener, executive vice president of Certegy check services.
With payroll checks, the focus is on verifying the identity of the check casher, he said. With purchases, the sale is evaluated based on fraud potential and prior purchasing patterns in the account. For example, the purchase of a laptop computer is more likely to be fraudulent than the purchase of a refrigerator, he said. Part of the challenge is that retailers demand speedy decisions to avoid holding up checkout lines.
Certegy is developing a service to notify banks when fraud is detected in a retail transaction.
Popiolek's quick action saved Pyramid's bank, Fifth Third Bank, from fraud losses. But the process was still painful. The bank, by its own admission, bungled the account closing, charging overdraft fees and even making an unauthorized transfer of $12,417 from another Pyramid account that Popiolek had reversed. It took a visit to the office of the bank's Tampa Bay president, Brian Keenan, to get the account completely closed, 18 days after the problem was reported. In the meantime, the dishonored checks were returned, marked as though there simply were insufficient funds in the account rather than a case of fraud.
"We made a mistake in the way we closed the account, but we flagged the account, and we did not let checks clear," Keenan said. He apologized to the Popioleks. "We just converted from First National, and we have a lot of new procedures in place."
Popiolek was upset because the Largo Police Department wasn't interested in investigating her complaint because the company hadn't lost money.
Detective Jim Monahan said it is more productive for cases to be investigated by an agency that has jurisdiction in the area where a fraudulent check is cashed. That way there is a witness and often a videotape and a thumbprint, he said.
"We try to make the case we can make as opposed to chasing a ghost," he said. Tampa Bay law enforcement agencies meet monthly to exchange information on financial fraud, he said.
Popiolek said she considers the company a victim. One employee has been turned down trying to cash a legitimate check.
"You want to have the ability if you need something from a job site to go in with a petty cash check and get it," she said. "I'm still a little shellshocked. I don't think this is over with yet."
Helen Huntley can be reached at 727 893-8230 or huntley@sptimes.com