With Personal Data in Hand, Thieves File Early and Often MIAMI — Besieged by identity theft, Florida now faces a fast-spreading
form of fraud so simple and lucrative that some violent criminals have
traded their guns for laptops. And the target is the United States
Treasury. With nothing more than ledgers of stolen identity information — Social
Security numbers and their corresponding names and birth dates — criminals
have electronically filed thousands of false tax returns with made-up
incomes and withholding information and have received hundreds of millions
of dollars in wrongful refunds, law enforcement officials say. The criminals, some of them former drug dealers, outwit the Internal
Revenue Service by filing a return before the legitimate taxpayer files.
Then the criminals receive the refund, sometimes by check but more often
though a convenient but hard-to-trace prepaid debit card. The government-approved cards, intended to help people who have no bank
accounts, are widely available in many places, including tax preparation
companies. Some of them are mailed, and the swindlers often provide
addresses for vacant houses, even buying mailboxes for them, and then
collect the refunds there. Postal workers have been harassed, robbed and, in one case, murdered as
they have made their rounds with mail trucks full of debit cards and
master keys to mailboxes. The fraud, which has spread around the country, is costing taxpayers
hundreds of millions of dollars annually, federal and state officials say.
The I.R.S. sometimes, in effect, pays two refunds instead of one: first to
the criminal who gets a claim approved, and then a second to the
legitimate taxpayer, who might have to wait as long as a year while the
agency verifies the second claim. J. Russell George, the Treasury inspector general for tax administration,
testified before Congress this month that the I.R.S. detected 940,000 fake
returns for 2010 in which identity thieves would have received $6.5
billion in refunds. But Mr. George said the agency missed an additional
1.5 million returns with possibly fraudulent refunds worth more than $5.2
billion. Florida, with its large population of elderly residents and health care
facilities, provides a wealth of opportunities for swindlers. South
Florida, which had the highest rate of identity theft in the nation, and
Tampa have been hit hardest. The United States attorney for the Southern District of Florida, Wifredo
A. Ferrer, called identity-theft tax fraud an “epidemic.” He formed a task
force of 18 federal and state agencies, including the I.R.S., to combat
the problem. Despite those efforts, it is worsening, Mr. Ferrer said. “The I.R.S. is doing what they can to prevent this, but this is like a
tsunami of fraud,” Mr. Ferrer said. “Everywhere I go, every dinner, every
function I attend, someone will come up to me and tell me they are a
victim — people in this office, police officers, firefighters.” In the past two years, the I.R.S. has recognized the severity and rise of
this type of fraud, and its vulnerability to it. The ease of electronic
filing and the boom in identity theft have outpaced the agency’s
technological ability to detect this sort of fraudulent claim, senior
agency officials say. The I.R.S. receives 100 million tax returns a year,
most filed within a short period of time and a vast majority legitimate. From 2008 to 2011, the number of returns filed by identity thieves and
stopped by the I.R.S. increased significantly, officials said. Last year,
it was at least 1.3 million, said Steven T. Miller, deputy commissioner
for services and enforcement at the agency. This year, with only 30 percent of the filings reviewed so far, the number
is already at 2.6 million. The bulk are related to identity theft, Mr.
Miller said. The agency, prodded by lawmakers and the public, is moving more
aggressively to stop the avalanche. It has increased the number of
investigators, put in place better technology that flags more returns,
distributed personal identification numbers to victims for the next filing
season and hired more workers to help taxpayers get their refunds. The
agency, which had $300 million cut from its budget this year, has invested
the same amount in combating the problem. The agency is also working with local law enforcement officials in
Florida, allowing them to obtain information on tax returns with the
permission of the rightful taxpayer, an important tool for investigators. “We have gotten much better at it,” Mr. Miller said, “and still have a
ways to go.” At the same time, members of Florida’s Congressional delegation have
introduced legislation to increase penalties on tax-fraud identity theft.
A wide-reaching bill sponsored by Senator Bill Nelson, a Democrat, would
also bolster protections for victims, help secure some Social Security
numbers and make it easier for law enforcement agencies to work together. “There is almost no disincentive, because the penalty is so low for a
thief to do this repeatedly,” said Representative Debbie Wasserman
Schultz, another Democrat who has introduced a bill. She said her South
Florida office had been inundated with complaints about tax-fraud theft in
the past year. Flora Goldberg, an 80-year-old Broward County resident, provided one of
them. Last year, she did what she has done for decades: she filed, or
tried to file, her tax return, this time electronically. But she quickly
received a message saying her claim had already been processed. One month
later, she got a letter informing her that she had been a victim of
identity theft. Impatient with the bureaucracy and the delays in getting answers, she
called her congresswoman. She received her $4,000 refund in December. “After I got the letter, then I was a little hysterical,” Ms. Goldberg
said, adding that the I.R.S. eventually assigned her a personal
identification number for future use. In South Florida and Tampa, the problem has gotten so bad that police
officers conducting unrelated searches or simple traffic stops routinely
stumble across ledgers with names and Social Security numbers, boxes of
stolen medical records and envelopes with debit cards. The Tampa Police Department set up a special unit last year related to
this kind of fraud after officers continued to find an “ungodly amount” of
identity-theft material, said Detective Sal Augeri, a veteran on the unit.
Last year, the department handled nearly 1,000 incidents; this year, the
number is “way, way above that,” he said. Fraudulent filers first used names and Social Security numbers of the
deceased to file claims. The numbers become public by law and, until
recently, were easily available on popular genealogy Web sites. Swindlers
also used the Social Security numbers of prisoners. When officials cracked down on those two avenues, the theft migrated to
anywhere Social Security numbers are collected. Most vulnerable are
records from health care facilities, assisted-living centers, schools,
insurance companies, pension funds and large stores that issue credit
cards. The police say employees steal the information and sell it, an
increasingly common practice here. Everyone is susceptible. Two dozen Tampa police officers, including one
whose job it is to investigate identity-theft fraud, had their identities
stolen and their tax refunds diverted this year. Career criminals know easy money when they see it. The police say they run
across street corner drug dealers and robbers who have been in and out of
prison for years now making lots of money by filing fraudulent returns.
Some have been spotted driving Bentleys and Lamborghinis. “A gentleman, a former armed robber, said: ‘I’m not doing robberies
anymore. This is much cleaner. I don’t even have to use a gun,’ ” said
Sgt. Jay J. Leiner of the economic crimes unit in the Broward Sheriff’s
Office, which has formed a multiagency task force. Mr. Ferrer, the United States attorney, said he had seen tax fraud
overtake violent crime in Overtown, a poor, high-crime section of Miami.
He said criminals there were holding filing parties, at which they would
haul out laptops and, for a fee, teach others how to run the swindle. “There is no real competition,” Mr. Ferrer said. “They are not fighting
each other. Altogether, they are stealing from the I.R.S.”
form of fraud so simple and lucrative that some violent criminals have
traded their guns for laptops. And the target is the United States
Treasury. With nothing more than ledgers of stolen identity information — Social
Security numbers and their corresponding names and birth dates — criminals
have electronically filed thousands of false tax returns with made-up
incomes and withholding information and have received hundreds of millions
of dollars in wrongful refunds, law enforcement officials say. The criminals, some of them former drug dealers, outwit the Internal
Revenue Service by filing a return before the legitimate taxpayer files.
Then the criminals receive the refund, sometimes by check but more often
though a convenient but hard-to-trace prepaid debit card. The government-approved cards, intended to help people who have no bank
accounts, are widely available in many places, including tax preparation
companies. Some of them are mailed, and the swindlers often provide
addresses for vacant houses, even buying mailboxes for them, and then
collect the refunds there. Postal workers have been harassed, robbed and, in one case, murdered as
they have made their rounds with mail trucks full of debit cards and
master keys to mailboxes. The fraud, which has spread around the country, is costing taxpayers
hundreds of millions of dollars annually, federal and state officials say.
The I.R.S. sometimes, in effect, pays two refunds instead of one: first to
the criminal who gets a claim approved, and then a second to the
legitimate taxpayer, who might have to wait as long as a year while the
agency verifies the second claim. J. Russell George, the Treasury inspector general for tax administration,
testified before Congress this month that the I.R.S. detected 940,000 fake
returns for 2010 in which identity thieves would have received $6.5
billion in refunds. But Mr. George said the agency missed an additional
1.5 million returns with possibly fraudulent refunds worth more than $5.2
billion. Florida, with its large population of elderly residents and health care
facilities, provides a wealth of opportunities for swindlers. South
Florida, which had the highest rate of identity theft in the nation, and
Tampa have been hit hardest. The United States attorney for the Southern District of Florida, Wifredo
A. Ferrer, called identity-theft tax fraud an “epidemic.” He formed a task
force of 18 federal and state agencies, including the I.R.S., to combat
the problem. Despite those efforts, it is worsening, Mr. Ferrer said. “The I.R.S. is doing what they can to prevent this, but this is like a
tsunami of fraud,” Mr. Ferrer said. “Everywhere I go, every dinner, every
function I attend, someone will come up to me and tell me they are a
victim — people in this office, police officers, firefighters.” In the past two years, the I.R.S. has recognized the severity and rise of
this type of fraud, and its vulnerability to it. The ease of electronic
filing and the boom in identity theft have outpaced the agency’s
technological ability to detect this sort of fraudulent claim, senior
agency officials say. The I.R.S. receives 100 million tax returns a year,
most filed within a short period of time and a vast majority legitimate. From 2008 to 2011, the number of returns filed by identity thieves and
stopped by the I.R.S. increased significantly, officials said. Last year,
it was at least 1.3 million, said Steven T. Miller, deputy commissioner
for services and enforcement at the agency. This year, with only 30 percent of the filings reviewed so far, the number
is already at 2.6 million. The bulk are related to identity theft, Mr.
Miller said. The agency, prodded by lawmakers and the public, is moving more
aggressively to stop the avalanche. It has increased the number of
investigators, put in place better technology that flags more returns,
distributed personal identification numbers to victims for the next filing
season and hired more workers to help taxpayers get their refunds. The
agency, which had $300 million cut from its budget this year, has invested
the same amount in combating the problem. The agency is also working with local law enforcement officials in
Florida, allowing them to obtain information on tax returns with the
permission of the rightful taxpayer, an important tool for investigators. “We have gotten much better at it,” Mr. Miller said, “and still have a
ways to go.” At the same time, members of Florida’s Congressional delegation have
introduced legislation to increase penalties on tax-fraud identity theft.
A wide-reaching bill sponsored by Senator Bill Nelson, a Democrat, would
also bolster protections for victims, help secure some Social Security
numbers and make it easier for law enforcement agencies to work together. “There is almost no disincentive, because the penalty is so low for a
thief to do this repeatedly,” said Representative Debbie Wasserman
Schultz, another Democrat who has introduced a bill. She said her South
Florida office had been inundated with complaints about tax-fraud theft in
the past year. Flora Goldberg, an 80-year-old Broward County resident, provided one of
them. Last year, she did what she has done for decades: she filed, or
tried to file, her tax return, this time electronically. But she quickly
received a message saying her claim had already been processed. One month
later, she got a letter informing her that she had been a victim of
identity theft. Impatient with the bureaucracy and the delays in getting answers, she
called her congresswoman. She received her $4,000 refund in December. “After I got the letter, then I was a little hysterical,” Ms. Goldberg
said, adding that the I.R.S. eventually assigned her a personal
identification number for future use. In South Florida and Tampa, the problem has gotten so bad that police
officers conducting unrelated searches or simple traffic stops routinely
stumble across ledgers with names and Social Security numbers, boxes of
stolen medical records and envelopes with debit cards. The Tampa Police Department set up a special unit last year related to
this kind of fraud after officers continued to find an “ungodly amount” of
identity-theft material, said Detective Sal Augeri, a veteran on the unit.
Last year, the department handled nearly 1,000 incidents; this year, the
number is “way, way above that,” he said. Fraudulent filers first used names and Social Security numbers of the
deceased to file claims. The numbers become public by law and, until
recently, were easily available on popular genealogy Web sites. Swindlers
also used the Social Security numbers of prisoners. When officials cracked down on those two avenues, the theft migrated to
anywhere Social Security numbers are collected. Most vulnerable are
records from health care facilities, assisted-living centers, schools,
insurance companies, pension funds and large stores that issue credit
cards. The police say employees steal the information and sell it, an
increasingly common practice here. Everyone is susceptible. Two dozen Tampa police officers, including one
whose job it is to investigate identity-theft fraud, had their identities
stolen and their tax refunds diverted this year. Career criminals know easy money when they see it. The police say they run
across street corner drug dealers and robbers who have been in and out of
prison for years now making lots of money by filing fraudulent returns.
Some have been spotted driving Bentleys and Lamborghinis. “A gentleman, a former armed robber, said: ‘I’m not doing robberies
anymore. This is much cleaner. I don’t even have to use a gun,’ ” said
Sgt. Jay J. Leiner of the economic crimes unit in the Broward Sheriff’s
Office, which has formed a multiagency task force. Mr. Ferrer, the United States attorney, said he had seen tax fraud
overtake violent crime in Overtown, a poor, high-crime section of Miami.
He said criminals there were holding filing parties, at which they would
haul out laptops and, for a fee, teach others how to run the swindle. “There is no real competition,” Mr. Ferrer said. “They are not fighting
each other. Altogether, they are stealing from the I.R.S.”
.
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