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Volume 22 Number 6, March 13, 2002

(Excerpted From Page 4)



Identity theft in the United States continues to rise at a growing cost to financial institutions, and is inflicting increasing harms on the population, the General Accounting Office has found. The GAO's findings were summarized in Feb. 14 testimony before the Senate Judiciary Subcommittee on Technology, Terrorism, and Govt. Information.

Complaints to consumer hot lines, the Federal Trade Commission and other sources show that Americans more than ever are at risk of having their money stolen and credit records wrecked…"Some individuals do not even know that they have been victimized until months after the fact and some known victims may choose not to report to the police, credit bureaus, or established hot lines," the report says.

In its first month of operation in Nov. 1999, the FTC Clearinghouse responded to an average of 445 calls per week. By March 2001, the average number of calls answered had increased to over 2,000 per week. In December 2001, the weekly average was about 3,000.

One consumer reporting agency (CRA) estimated that its 7-year fraud alerts involving identity theft increased 36 % over 2 recent years –from about 65,600 in 1999 to 89,000 in 2000. A second agency reported that its 7-year fraud alerts increased about 53 % in recent

comparative 12-month periods -- from 19,347 during July 1999-June 2000, to 29,593 during

July 2000-June 2001, GAO reported.

Under MasterCard's and Visa's rather narrow definition of identity fraud -- account takeovers and fraudulent applications -- losses from U.S. operations rose from $79.9 million in 1996 to $114.3 million in 2000, a 43 % hike. Under law enforcement's broader definition, encompassing virtually all categories of payment card fraud, the Visa/MasterCard total U.S.

PRIVACY TIMES/March 13, 2002 Page 5

fraud losses rose 45%, from about $760 million in 1996 to about $1.1 billion in 2000. But the associations said theses losses represented about 1/10th of 1% or less of U.S. member banks’

annual sales volume during 1996 through 2000.

"Identity theft can cause substantial harm to the lives of individual citizens -- potentially severe emotional or other non-monetary harm, as well as economic harm. Even though financial institutions may not hold victims liable for fraudulent debts, victims nonetheless often feel 'personally violated' and have reported spending significant amounts of time trying to resolve the problems caused by identity theft -- problems such as bounced checks, loan denials, credit card application rejections, and debt collection harassment," it wrote. (GAO-02-424T, Identity Theft: Available Data Indicate Growth in Prevalence & Cost (

Minnesota. Despite growth in identity fraud, the laws that make it illegal have seldom been used in Minnesota, the Minneapolis Tribune reported. Minnesota prosecutors described the state's identity fraud statute as a feel-good law that helps victims file police reports but does little to punish thieves or forgers.

Instead, nearly all are tried under older theft, fraud and money-laundering statutes. Hennepin County Prosecutor Andy LeFevour said that penalties under the identity theft statute

basically mirror those of the check forgery law. An identity fraud case would require an extra layer of evidence, he said. Hennepin County has filed fewer than 100 cases under the August 1999 State law. Ramsen County has filed fewer than 10 identity fraud cases.

Before a federal law took effect in 1998, only banks and other creditors were considered victims of document fraud because they were the ones that lost money. But the new law recognized the harm to a victim's credit history and reputation. The U.S. attorney's office in Minneapolis prosecutes one or two cases a year under that law. Some prosecutors said longer sentences were needed, noting that the maximum sentence for bank fraud is 30 years in prison, compared with 15 years for the typical identity theft case

Biometrics. Biometrics and other technologies being crafted to combat identity fraud may not be completely effective unless verifiers are asked to provide information about something only they would know, such as an old phone number or a former address, according to a white paper co-authored by Lexis-Nexis Chief Privacy Officer Norman Willox, Jr.

Florida Case. Two salespeople at the Kia dealership at the West Palm Beach, Fla. Auto Mart, who have been fired for allegedly being part of an identity theft ring that victimized people in Miami, Michigan and Connecticut -- including an 82-year-old Florida man. Nieves Brantley and Apryl King are accused of using information from stolen wallets and checks to help their friends buy cars. When a customer called the Auto Mart, saying he never purchased a car there nor had he ever been to the dealership, the general manager became suspicious. Palm Beach County Sheriff's Office spokesman Paul Miller said, "We believe the two fugitives not only had been involved in acquiring ID for a long period of time, but may be in possession of other people's IDs," Miller said. The third person arrested was Jeremy Mangual. Jabez Jacobs and Ivory Bruce are considered fugitives who detectives believe could still be in the West Palm

Page 6 PRIVACY TIMES/March 13, 2002

Beach area. "They acquired identities from different people from all over the U.S.," Miller said. Sheriff's officials warned people to check credit reports and bank statements regularly for items that they never purchased.

Prudential Employee. A former employee of the Prudential Insurance Co. was arrested March 1 and charged with stealing the identities of colleagues from a database containing 60,000 names and selling some of them over the Internet as part of a credit card scam. While working in the tax department at Prudential, the former employee, Donald Matthew McNeese of Callahan, Fla., stole the database of personnel records, making it one of the largest potential identity-theft cases ever, said Jim Walden, the assistant U.S. Attorney for the Eastern District of New York. Walden would not specify how many people had money stolen in the scam, the New York Times reported. Investigators in New York had been tracking McNeese for two years, after a detective in Brooklyn went online and noticed that McNeese had posted an e-message announcing he had thousands of names and Social Security numbers for sale, the government said. Investigators said they believed that McNeese also co-opted personal information at another company, but would not provide details, citing a continuing investigation. McNeese, 30, was arrested at his house in Florida and is awaiting arraignment in Jacksonville, Fla., on charges of identity theft, credit fraud and money laundering, the authorities said. During his arrest, prosecutors said, he admitted taking the database when he worked at Prudential's Jacksonville office in 2000. During a search of his house, investigators seized a computer, a shotgun with a silencer and fake federal ID.

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