Burlington County Woman Sentenced To Three Years In Prison For Defrauding Retailers Of $500,000 Through Debit Card Scheme
NEWARK, N.J. - A Burlington County, N.J., woman who used a debit card fraud scheme to steal more than $500,000 from clothing retailers was sentenced today to 36 months in prison, U.S. Attorney Paul J. Fishman announced.
Temeshia McDonald, 29, of Mount Holly, N.J., previously pleaded guilty before U.S. District Judge Susan D. Wigenton to an information charging her with one count of access device fraud. As part of the sentence, McDonald was ordered to pay $557,690.18 in restitution to the retailers victimized by her fraud, including Victoria’s Secret, Banana Republic, Wet Seal, and BCBG. Judge Wigenton imposed the sentence today in Newark federal court.
According to documents filed in this case and statements made in court:
McDonald took advantage of a particular type of debit card transaction known as a “forced sale,” which is used from time to time in regular business dealings and is described briefly below.
Ordinarily, when a merchant swipes a credit or debit card, a computerized check is performed to determine whether the account associated with the card is valid. If the account is open and funds are available, the transaction goes through; if the account is closed or funds are unavailable, the transaction is denied. If the transaction is denied, a merchant has two choices: ask the customer for another card, or perform a “forced sale” using the declined card. During a typical forced sale, the merchant calls the card issuer (i.e., the customer’s bank or credit card company) and receives an authorization code. The merchant types the code into the credit card terminal and “forces” the transaction, essentially overriding the denial and allowing the sale to go through. At some later date, the merchant and the card issuer settle the outstanding charge.
But for technical reasons relating to the forced sale process, it does not actually matter what code the merchant types into the terminal. Any combination of digits will override the denial. So long as the customer provides a fake authorization code and convinces the merchant to enter it into the terminal, the transaction will go through. The merchant is unlikely to discover the fraud until days or weeks later.
From April 2011 to September 2012, Defendant McDonald convinced retail merchants to “force” more than 500 transactions on her behalf, totaling more than $800,000 in attempted credit card purchases. Defendant McDonald used this “forced sale” scheme to obtain gift cards, clothes, and accessories from a variety of retail stores, including Victoria’s Secret, Wet Seal, Banana Republic, and BCBG, in New Jersey and other states.
In McDonald’s case, when the cashier finished ringing up McDonald’s goods, McDonald would provide an expired or counterfeit card. The transaction would be denied. McDonald would then pretend to call the card issuer and/or claim to possess an “authorization code” that would allow the purchase to go through. The cashier would then enter the code, thereby forcing the sale and permitting the purchase. Only later, when the merchant and the credit card company attempted to settle the charge, would the retail store realize that McDonald had provided a fake code.
In addition to the prison term, Judge Wigenton sentenced McDonald to three years of supervised release and ordered her to pay restitution of $557,690.
U.S. Attorney Fishman credited special agents of the U.S. Secret Service, Newark Field Office, under the direction of Special Agent in Charge James Mottola, with the investigation leading to today’s sentencing.
The government is represented by Assistant U.S. Attorney Andrew Bruck and Special Assistant U.S. Attorney Thomas Kearney of the U.S. Attorney’s Office Criminal Division in Newark.
Defense counsel: Lorraine Gauli-Rufo Esq., Assistant Federal Public Defender, Newark