Case Study: Organized Refund Fraud

Organized refund fraud has been going on for many years, and it is likely to continue, especially if stores make it easy for thieves to get away with it.


On these field trips, he would make between 10 and 12 returns at different stores each day, receiving about $2,000 in cash daily. He parceled out the returns so that each refund was for an amount slightly under $200. This amount was important to make sure the refund would fall under the store’s radar.

One of the factors that made T.J. Maxx and Marshalls attractive targets for refund fraud is that the stores did not require identification for cash refunds. The male would sign the return slips with a fictitious name and address. When the signatures on the slips were compared later, they were all found to have been written by the same person.

The couple also found these stores to be juicy targets because they were aware that the stores were affiliated. They also knew that there was no computer connectivity among different stores. So when the male made a return in, say, New Hampshire, he would present a slip showing that the items had been purchased in, for example, Pennsylvania. The local New Hampshire store’s computer would have no way to verify the information and would have to go by what was on the receipt and the merchandise tag.

MAKING A CASE

MarMaxx loss prevention became aware of the deception perpetrated by this couple and began gathering evidence against them. The evidence included in-store video surveillance footage, photos, documents and more. This mountain of data was collected in three six-inch wide binders.

A company investigator brought the neatly packaged evidence to a federal law enforcement agency to pursue prosecution of the couple. Despite the heap of documentation, the F.B.I. refused to take the case. According to an anonymous F.B.I. source, the agency will not touch retail cases under half a million dollars.

Because the majority of the fraudulent transactions were committed in New Jersey, the investigator then spoke with the New Jersey Office of the Attorney General, but got the same result. The New Jersey State Police was likewise uninterested in pursuing a criminal case against the couple.

The investigator eventually worked his way to the police department in Holmdel, N.J., a town in Monmouth County. Holmdel is bisected by the Garden State Parkway, a main New Jersey thoroughfare. It is also home to the PNC Bank Arts Center, which hosts many concerts featuring big-name stars. In addition, it has a number of strip malls containing many national stores, including Marshalls and T.J. Maxx branches.

Det. Eric Hernando was presented with the evidence. On first glance, it appeared to be a wealth of information that could be used to build a strong case against the couple. But when he asked his sergeant for the go-ahead to pursue the case, he was shot down.

However, once his supervisor realized that the case had basically already been made and that the detective had only to verify information, he gave it a nod.

On May 10, 2005, arrest warrants were issued for the couple. They were charged with theft by deception; conspiracy; criminal simulation; and forgery. The wife turned state’s evidence in order to be allowed to remain at home with her children, while the husband was sentenced to incarceration for his part in the scam.

THE LESSON

Unfortunately, the MarMaxx investigator’s experience is not unique. Many retail loss prevention personnel suffer similar frustrations when trying to get a law enforcement agency to bring charges against criminals who have ripped off their stores.

Right now, federal agencies are unlikely to take such cases unless they are in on them from the beginning. And getting their cooperation to make a case can be next to impossible.

Large state agencies are often similarly unwilling to go forward on a retail case. Their reasons for failing to do so vary, but they often believe that the cases are too small in the scheme of things to bother with -- after all, they don’t involve violence, and they’re not sexy enough to make headlines. Remember, even Claude Allen’s case fizzled out of the media spotlight within mere days.

The agencies may also lack knowledge and experience with retail crime, which makes them even more hesitant to proceed.