The Massachusetts attorney general is planning to seek indictments of 19 people by the end of the month for running a check-fraud ring that cashed $500,000 in phony and stolen checks throughout New England.
An official who asked not to be named said that the losses were incurred mostly by supermarkets, although some banks, including Shawmut National Corp. and Bank of Boston, lost thousands of dollars.
Though the case is only one of the innumerable instances of check fraud around the country, it highlights the persistence of losses and the ease with which criminals can use fraudulent or stolen checks to get money.
Used Legitimate Printer
In this case, the ring is believed to have gotten a legitimate, New Jersey-based check printing company to prepare check stock with the names and active account numbers of legitimate businesses.
Members of the ring then made hundreds of these checks payable to themselves, in amounts typically for $322.50, the official said.
With grocery store courtesy check-cashing cards, which were obtained using fake identification, as many as three or four members of the ring at a time would walk into grocery stores, say the checks were paychecks, and cash them.
The ring hit as many as 15 grocery stores a day.
"The checks were perfect," the official said. "They were even typed with a computer printer."
The official added that the ring cashed checks at grocery stores in Connecticut, Rhode Island, and "every county in Massachussetts."
Supermarkets May Lose
One firm, Arbella Mutual Insurance Co., of Quincy, Mass., said that from May to June, the ring cashed nearly 60 phony checks drawn against an Arbella account at State Street Bank.
State Street identified the phony checks before funding them, keeping both the bank and the insurance company from risking any losses, said Dale Young, an Arbella accounting manager.
But the supermarkets that cashed the checks stand to lose money.
Mr. Young speculated that the fraud ring may have gotten Arbella's account number from an insurance claim check.
He said the incident motivated the insurance company to accelerate its installation of a bank serviced called positive pay that helps banks identify forged checks presented against corporate accounts.
Authentic Checks Forged
The banks lost money from a different ploy -- the cashing of authentic corporate checks stolen from companies including the Bostonian Hotel, the official said.
Signatures were forged, and the checks were successfully cashed at some banks.
The official said that Shawmut lost $20,000 from this type of fraud, and that Bank of Boston lost a "few thousand dollars."
A totoal of about 500 phony and stolen checks have been cashed by the ring since 1990 for a total of about half a million dollars, the official said.
The official would not name the members of the ring, but he said that they all have criminal records for a variety of offenses, including drug violations and theft.
He said tht a number of indictments would be sought in cases to be filed in Suffolk, Middlesex, and Norfolk counties.
He added that members of the ring came mostly from the Roxbury area of Boston and from Cambridge.
The official said that 35 people probably were involved in the ring.
But indictments willy only be sought in cases where law enforcement officials have photographs of the suspects, or other solid evidence, he said.
Other Cases Being Pursued
The official added that the New Jersey printing company was not breaking any laws, and will not be prosecuted.
But the official said the New Jersey firm exercised poor judgment in preparing check stock that was mailed to people with residential addresses different from the addresses of the companies listed on the checks.
The official said the New Jersey printing company cooperated in the investigation.
The case is not the biggest one on the check-fraud agenda of law enforcement agencies in New England.
The official said that authorizaties are investigating other sophisticated rings that are believed to have cashed millions of dollars in fraudulent checks.
The official said that the people involved in these cases are not "in the Mafia" but are on the fringes of organized crime groups.