For nearly a decade the funds flowed, from the U.S. Treasury into accounts at some 100 institutions, and from there to Nigeria, federal authorities said Wednesday as they announced the indictments of five people accused of siphoning off $10 million through identity theft and fraud.
The money crossed oceans, the 2,400 victims and abused financial institutions are nationwide and the defendants live in three states. But the tip that brought the scheme down came from an employee of little Widget Financial credit union in Erie, according to federal law enforcement.
That employee, who was not named, noticed the same phone number on two otherwise different account applications in 2012. The employee contacted the FBI, which worked with IRS Criminal Investigations to look into the matter.
What they found was fraud and identity theft "on a scale that's unprecedented here," said U.S. Attorney David J. Hickton. "We were fortunate to find these [defendants] in the United States," he added, as fraud of this magnitude is often traced to international criminals.
This investigation is likely to broaden, said Patrick Fallon Jr., FBI assistant special agent in charge. "These cases expand, not only across the nation, but across the globe," he said.
Indicted, arrested and moving through the arraignment process at the federal courthouse in Erie were Doherty Kushimo, 52, of Providence, R.I.; Saburi Adeyemi, 56, of Memphis, Tenn.; and New York area residents Abiodun Bakre, 49, Adetunji Gbadegshi, 57, and Adebola Mejule, 54. All are of Nigerian descent.
"They did work closely together," Mr. Fallon said. "It's a confederation of thieves, basically."
Roger A. Cox, the court-appointed attorney for Mr. Adeyemi, said his client is a naturalized U.S. citizen with an American wife who only "vaguely knew" the other defendants.
"My client had $7 in the bank. His car doesn't run. He can't get it fixed. He works in a warehouse for $10 an hour and has for years," Mr. Cox said. "He seems utterly amazed and confused by the whole thing."
Mr. Mejule "has no prior criminal record," said his attorney, Philip B. Friedman. "He works for the city of New York. He's basically a social worker. He's an American citizen. He has a wife and three children."
If convicted, they could face prison terms of 20 years.
"Those who commit refund fraud and identity theft of this magnitude deserve to be punished to the fullest extent of the law," said Akeia Conner, the special agent in charge of IRS Criminal Investigations for the state.
According to the indictment, the defendants got names, Social Security numbers and dates of birth of thousands of people, through means that law enforcement has yet to fully catalog.
Ms. Conner described a variety of ways criminals get such information, from pulling receipts out of trash bags to bribing employees of data-rich firms.
The defendants are accused of using the information to set up bank accounts for victims selected largely for their youth, because young people tend to file their tax returns later. The banks they used included PNC Bank, the Pennsylvania State Employees Credit Union and institutions as far afield as the Windward Credit Union in Hawaii.
The defendants electronically filed tax returns in the victims' names, seeking $21 million in refunds and collecting $10 million, according to the indictment. Mr. Fallon said investigators have not yet added up the money stolen through false credit cards.
The defendants inflated the refunds by claiming credits for fuel taxes and farming losses, Mr. Fallon said.
The defendants switched cell phones and email addresses, used anonymizing software and air cards so their locations could not be pinpointed and spoke in code words, according to prosecutors.
Such means are typical of highly organized identity theft schemes, said Bruce Antkowiak, a former federal prosecutor and now a law professor at Saint Vincent College in Unity, Westmoreland County. "These are people who have tremendous expertise in these areas, and when they turn it towards this kind of activity, they can, for a period of time, get away with it," he said.
"We investigate all identity theft that is reported to us," Ms. Conner said, adding that the IRS can't always connect the dots and discern a conspiracy.
Two weeks ago, the IRS announced that it had started 295 new identity theft investigations since January, and had 1,800 active cases. The number of identity theft cases initiated by the agency's Criminal Investigations division has risen from 276 in 2011 to 1,492 in 2013.
Mr. Hickton said there were no known ties among the five defendants and other high-profile data breaches, such as the report last week that the personal information of as many as 27,000 UPMC employees may have been put at risk, resulting in the filing of hundreds of fraudulent tax returns.
The scheme described in Wednesday's indictment isn't near the top of the heap in terms of numbers of victims, said Bill Hardekopf, CEO of LowCards.com, which analyzes the credit card industry and reports on identity theft.
"I don't want to say that's small scale," Mr. Hardekopf said. "If you're one of those 2,400 people, it's major."
These days, he said, "we see these quite often. Some target tens of millions" of people.
"What these criminals steal in a second also takes the victims years to recover," Mr. Hickton said. He recommended that people be "stingy" with their personal information, check their credit reports twice a year and change their passwords monthly.
"We're kidding ourselves," Mr. Fallon added, "if we think there's a foolproof method of protecting ourselves."
Rich Lord: email@example.com, 412-263-1542 or on Twitter @richelord. First Published April 23, 2014 1:24 PM