[Clips] As Identity Theft Moves Online, Crime Rings Mimic Big Business

[R.A. Hettinga]

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 Subject: [Clips] As Identity Theft Moves Online,
 	Crime Rings Mimic Big Business
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 <http://online.wsj.com/article_print/0,,SB112121800278184116,00.html>

 The Wall Street Journal

  July 13, 2005
  U.S. BUSINESS NEWS


 Fraud Inc.
  As Identity Theft Moves Online,
  Crime Rings Mimic Big Business
 Russian-Led Carderplanet
  Steals Account Numbers;
  Mr. Havard Hits ATMs
 'Common Punk' to 'Capo'

 By CASSELL BRYAN-LOW
 Staff Reporter of THE WALL STREET JOURNAL
 July 13, 2005; Page A1


 At 19 years old, Douglas Cade Havard was honing counterfeiting skills he
 learned in online chat rooms, making fake IDs in Texas for underage college
 students who wanted to drink alcohol.

 By the age of 21, Mr. Havard had moved to England and parlayed those skills
 to a lucrative position at Carderplanet.com, one of the biggest
 multinational online networks trafficking in stolen personal data. Having
 reached a senior rank in the largely Russian and Eastern European
 organization, he was driving a $57,000 Mercedes and spending hundreds of
 dollars on champagne at clubs and casinos.

 Now 22, Mr. Havard is in a Leeds prison cell, having pleaded guilty to
 charges of fraud and money laundering. The Carderplanet network has been
 shut down.

 As other similar groups thrive and proliferate, Mr. Havard's case provides
 a rare insight into the underground marketplace for stolen information, a
 surging white-collar crime of the 21st century. It affects as many as 10
 million Americans at a price tag of $55 billion to American business and
 individuals, according to industry and government studies.

 While banks typically compensate customers for fraudulent losses, victims
 can spend hundreds of hours repairing the havoc wreaked on their personal
 records and finances and often end up paying legal fees to do so.
 Sometimes, ID-theft victims are forced to pay off the debt racked up in
 their name by fraudsters. In the most insidious cases, they are arrested
 for crimes committed by the person who stole their identity.

 Most identity theft still occurs offline, through stolen cards or rings of
 rogue waiters and shop clerks in cahoots with credit-card forgers. But as
 Carderplanet shows, the Web offers criminals more efficient tools to
 harvest personal data and to communicate easily with large groups on
 multiple continents. The big change behind the expansion of identity theft,
 law-enforcement agencies say, is the growth of online scams.

 Police are finding well-run, hierarchical groups that are structured like
 businesses. With names such as Carderplanet, Darkprofits and Shadowcrew,
 these sites act as online bazaars for stolen personal information. The
 sites are often password-protected and ask new members to prove their
 criminal credentials by offering samples of stolen data.

 Shadowcrew members stole more than $4 million between August 2002 and
 October 2004, according to an indictment of 19 of the site's members
 returned last October by a federal grand jury in Newark, N.J. The
 organization comprised some 4,000 members who traded at least 1.5 million
 stolen credit-card numbers, the indictment says.

 The organizations often are dominated by Eastern European and Russian
 members. With their abundance of technical skills and dearth of jobs,
 police say, those countries provide a rich breeding ground for identity
 thieves. One of Carderplanet's founders was an accomplished Ukrainian
 hacker who went by the online alias "Script," a law-enforcement official
 says. As with many of its peers, the Carderplanet site was mainly in
 Russian but had a dedicated forum for English speakers.

 One English speaker was Mr. Havard. He was arrested in Leeds in June 2004
 after allegedly stealing millions of dollars from bank accounts in the
 United Kingdom and the U.S. The charges against him have been detailed in
 hearings in the Leeds Crown Court, where Mr. Havard recently pleaded
 guilty. Last month, he was sentenced by a British judge to six years in
 prison. His U.K. lawyer, Graham Parkin, says Mr. Havard "accepts his role."

 Mr. Havard grew up in an upper-middle-class neighborhood in north Dallas.
 The son of a well-off entrepreneur who founded a local
 health-care-technology company, he attended a private high school and then
 Southern Methodist University before dropping out in the summer of 2002
 after his freshman year.

 Mr. Havard began honing his criminal skills as a tall, heavy-set teenager.
 He started using computers at a young age because of writing difficulties,
 his lawyers say. He learned about making fake IDs in online discussion
 forums.

 In February 2002, Dallas police arrested the blue-eyed, brown-haired youth
 selling 10 gallons of an ecstasy-like party drug to an undercover cop,
 according to a report of the arrest. By that summer, aged 19, he faced a
 total of five felony charges, including drug-dealing, robbery at gunpoint
 and counterfeiting, court documents in Texas' Dallas and Collin counties
 show. He soon broke bail and fled the U.S.

 Mr. Havard is the kind of "common punk that we deal with every day," says
 Eric Mountin, an assistant district attorney in Dallas county. "The only
 difference is that he comes from a more well-to-do family, which gave him
 more freedom to move internationally." Mr. Havard's father declined to
 comment about his son's activity.

 U.S. authorities are seeking to extradite Mr. Havard to prosecute him for
 the charges he faces in Texas. His U.S. lawyer, Kevin Clancy of Dallas,
 says "we're vigorously defending him against the extradition proceedings
 and the charges."

 After skipping bail, Mr. Havard traveled to Belize, Costa Rica and Canada.
 He maintained his contact with the online counterfeiting world during his
 travels and began interacting with Russian thieves, his lawyers say. With
 no steady income, he made money as a middleman in a scam buying and selling
 goods with stolen credit-card numbers, his lawyers say. It's unclear when
 he first joined Carderplanet.

 In early 2003, he arrived in the U.K. using an Irish passport in the name
 of McNamara, they say. He met up with people he had met online and settled
 in Leeds, a city once known for its textile mills that is undergoing a wave
 of redevelopment.

 Using the nickname "Fargo," which is a brand of machines used to encode
 magnetic strips, he communicated regularly with other members of
 Carderplanet, which had started in 2001, according to U.K. and U.S.
 authorities.

 He became a "reviewer" on the site, testing illicit merchandise before it
 was sold, according to the U.K.'s National Hi-Tech Crime Unit, or NHTCU,
 which led the investigation of Carderplanet. Would-be sellers mailed Mr.
 Havard copies of fake drivers' licenses and counterfeit travelers checks
 that he screened to check the authenticity of their security features, such
 as their crests and colors, the U.K. police agency says.

 Mr. Havard worked his way up the organization to the status of "Capo di
 Capi," a misspelled version of a title typically associated with the
 Italian mafia, U.K. and U.S. authorities say. "Capo dei Capi" means "the
 boss of all bosses," but was used more loosely in the Carderplanet network
 to signify high rank. In an organization largely made up of Russian and
 Eastern European members, Mr. Havard is one of only two Americans
 authorities believed to have reached that status. At the very top of the
 organization were about half a dozen individuals who called themselves "the
 family," the NHTCU says.

 Carderplanet boasted roughly 7,000 members and served as a marketplace for
 millions of stolen accounts, according to Larry Johnson, special agent in
 charge of the U.S. Secret Service's criminal investigative division. Many
 of the stolen accounts came from hackers who targeted dozens of
 organizations such as banks, e-commerce sites and government agencies in
 the U.S., U.K. and Australia, he says.

 The NHTCU suspects fake emails and Web sites may also have been used to
 harvest information trafficked on the site. One common form of theft is
 known as phishing, which uses emails designed to look as if they are from a
 legitimate bank or retailer to trick consumers into entering credit-card,
 banking or other sensitive information at fake Web sites. Stolen account
 information can sell online for as little as a few dollars and as much as
 several hundred dollars.

 Mr. Havard teamed up with Lee Elwood, a 23-year-old Scotsman he met via
 contacts he made online. Mr. Elwood, who used the online alias "Raptor,"
 frequently commuted to Leeds from his base in Glasgow, prosecutors say. The
 pair rented a series of short-term properties for their activities, often
 paying rent upfront in cash. Mr. Elwood didn't respond to a letter mailed
 to him in prison. His lawyer declined to comment.

 By late summer 2003, they were hard at work. The Russians relayed to them
 pairs of ATM accounts and PIN numbers via instant messenger, typically in
 batches of 50 to 120, according to the NHTCU. With extra software, instant
 messenger can be made more secure than email. Messrs. Havard and Elwood
 loaded the information onto the magnetic strips of blank cards and pre-paid
 cellphone cards using hand-held encoders that plug into a computer, the
 NHTCU says.

 The two men then withdrew money from bank machines with the fake cards,
 sending 60% of the proceeds back to St. Petersburg and elsewhere in Russia
 via Western Union, the NHTCU says. Western Union records show several names
 as being the recipients of the funds, but it's unclear if the recipients
 belonged to one gang or to different groups, the U.K. agency says.

 Messrs. Havard and Elwood split their 40% cut between themselves, after
 allowing for a 5% wire-transfer fee, according to prosecutors. Mr. Havard
 also sometimes worked with a small team in the U.S., to which he relayed
 the stolen data forwarded by the Russians. The Russians kept close tabs on
 what Mr. Havard did and complained that he took out less than the limit on
 the cards, Mr. Havard's lawyers say.

 In another scam, Mr. Havard and Mr. Elwood obtained stolen credit-card
 details via Carderplanet connections and used them to buy laptop computers
 and other electronic goods online, prosecutors say. They then resold the
 merchandise on online auction sites such as eBay Inc.

 >From August 2003 to mid-2004, Messrs. Havard and Elwood stole about $1.3
 million from British and American bank accounts using the stolen ATM-card
 information forwarded by the Russians, U.K. prosecutors allege. Altogether,
 including the proceeds from their credit-card swindles, the NHTCU suspects
 the two men stole about $11.4 million over the course of about 18 months
 starting in early 2003.

 The money funded an extravagant lifestyle. Mr. Havard's Mercedes had tinted
 windows, a leather interior and a top-of-the-line stereo system, the NHTCU
 says. Mr. Elwood also bought a Mercedes and a Rolex watch. Mr. Elwood told
 British authorities he earned up to about $3,500 a week from his
 activities, but police suspect it was significantly more than that.

 Business came to an abrupt end in June 2004 after U.K. law enforcement
 received a tip from the Federal Bureau of Investigation, which was looking
 for Mr. Havard in connection with his Texas crimes. Mr. Havard awoke one
 morning to find a dozen policemen at his converted-warehouse apartment in
 Leeds, the NHTCU says.

 The officers discovered $28,000 of forged traveler's checks and a portfolio
 of identities bearing his photo, including phony drivers' licenses and fake
 or doctored passports from Spain, Ireland and the U.S.

 The policemen also found high-resolution images of bank and credit-card
 logos stored on a computer along with fake holograms, blank plastic cards
 and a heat press for embossing numbers. Mr. Havard also had about $17,600
 in cash stashed at various addresses, the NHTCU says.

 Investigators then zeroed in on Mr. Elwood, who was arrested two weeks
 later in Glasgow. Soon after, senior members of Carderplanet closed the
 site down, citing law-enforcement scrutiny, says Mr. Johnson. Shadowcrew
 and Darkprofits also have shut down amid a sweeping crackdown by U.S. law
 enforcement.The NHTCU says it hasn't extended its investigation to Russia.
 The Russian police declined to comment. U.S. law-enforcement officials say
 that while cooperation from Russian authorities on cyber crime is
 improving, they receive help on maybe one of about every six requests for
 assistance. U.S. authorities continue to investigate the Carderplanet
 network.

 In April, Mr. Elwood received a four-year jail sentence after also pleading
 guilty to fraud and money laundering. Last month, Mr. Havard stood in a
 small, windowless courtroom in Leeds. Sporting a gray polo shirt and jeans,
 he appeared tired. Police officers said he'd lost weight. Mr. Havard
 swallowed and stared straight ahead as the judge noted the seriousness of
 his crimes. He remained stony-faced as his six-year sentence was delivered.


 --
 -----------------
 R. A. Hettinga <mailto: rah at ibuc.com>
 The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
 44 Farquhar Street, Boston, MA 02131 USA
 "... however it may deserve respect for its usefulness and antiquity,
 [predicting the end of the world] has not been found agreeable to
 experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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