8 Plead Guilty in Area Restaurant Credit Card-Skimming Scam
Tuesday, June 9, 2009
The charges began appearing on their credit card bills after they had eaten at well-known Washington restaurants: thousands of dollars for televisions and iPods at Target; hundreds more for American Express gift cards at Giant Food.
The cardholders, who hadn't made any of those purchases, called their banks, which contacted the U.S. Secret Service. Agents then tracked the fraudulent transactions back to the restaurants, prosecutors said.
It turned out that some servers at those restaurants -- Clyde's, M&S Grill and 701 -- had used hand-held skimming devices to steal credit card numbers and give them to three men, who used the numbers to buy purses and clothing at Gucci and Barneys, along with games and other merchandise. Numerous diners got stuck with the bill -- a $736,393 tab.
Federal prosecutors in Alexandria announced yesterday that eight people have pleaded guilty over the past two months in the conspiracy, a scheme that led to thousands of transactions with stolen credit card numbers affecting more than 50 financial institutions. After realizing that it was all a scam, the banks absorbed the losses, officials said.
Among those who pleaded guilty and are facing up to five years in prison are three former servers at M&S Grill, one from Clyde's Restaurant and one from 701 Restaurant. Court documents said three Maryland men, who pleaded guilty to charges including bank fraud and aggravated identity theft, conceived of the scam. One of the men paid the servers $20 for each swiped credit card number.
The three men would then slide their own credit cards through a different device, which would encode the stolen card numbers into the magnetic strips on their cards. That meant that the restaurant customers' cards would be charged, prosecutors said.
Spokesmen for Clyde's and 701 Restaurant said yesterday that they cooperated with federal authorities and assured customers that their credit cards will be protected. "We've had no other problems with credit cards of any kind,'' said Claude Andersen, corporate operations manager for the 13 Clyde's restaurants in the Washington region.
Andersen said the server who pleaded guilty, Jamaal Snowden, 26, of Upper Marlboro, stopped coming to work about the time federal agents arrived last year. "We didn't even know it was happening, and by the time we did, it was over,'' he said.
Ashok Bajaj, the owner of 701, said the restaurant was a victim because he agreed to keep employing the server, Lavelle Payne, at the request of agents when they knew she was skimming. "We were disappointed when they went public and basically gave our restaurant a bad name,'' said Bajaj, who added that 701 has upgraded computer equipment to make sure skimming does not happen again.
Payne, 41, of the District pleaded guilty to conspiracy to commit access device fraud.
An M&S manager referred calls to a corporate spokeswoman, who did not return a phone message. The former M&S servers who pleaded guilty to the fraud charge were Simone Carrie Diane Folk, 28, of Brentwood; Vasha Monique Carter, 31, of St. Augustine, Fl.; and Shannon Eileen McLaughlin, 23, of Oxon Hill.
The five servers are scheduled to be sentenced during the next two months.
An attorney for one of the ringleaders, Joseph A. Bush III, 28, of Fort Washington, declined to comment. Attorneys for the other two -- Aaron D. Gilbert, 25, of Bowie, and Erick V. Burton, 38, of District Heights, did not return phone calls late yesterday afternoon. The three are scheduled to be sentenced over the next 2 1/2 months.
Court documents said the investigation began last year when Citigroup contacted the Secret Service after calls from customers. Agents contacted the other restaurants, which isolated the servers through internal systems that assigned a number or employee card for each server.
The agents learned that the servers were using skimming devices that looked like little black boxes to swipe customer credit cards. They would then give the skimmers to Bush, prosecutors said.
Bush, Burton and Gilbert then used the cards, which looked real, to buy merchandise and gift cards that they would redeem at high-end stores or sell at a discount. Officials said the case was prosecuted in Alexandria because many of the purchases were made in Northern Virginia.