Bank Account Fraud: Tenacity Reaps Results in Perplexing Maze

This FBI financial analyst has worked on numerous cases, but there's one that sticks in her mind because she wasn't sure if she and the case agent would ever solve it. It was a "hit and run" bank account fraud that involved stolen identities, frustrating twists and turns, and just enough good luck to crack it.  

Have you ever had a case that you just couldn't get off your mind - one in which you have no problem remembering the players and minute details? Or a case in which you wondered if you'd ever solve it because the trail had run cold and clues were elusive. Well, this case falls into both categories. It wasn't the biggest case I've ever worked or the one with the largest losses, but it was memorable for all its twists and turns.

I worked this case as an FBI financial analyst, along with the assigned FBI special agent. I've changed the names, but many of the facts are the same.

In the third week of May 2000, a man using the name of Martin Horgan opened up four different bank accounts at three different banks in Omaha, Neb. At the time each account was opened, between $25 and $200 cash was deposited. Horgan used the same scam at each bank; he would deposit a check into his new account and simultaneously withdraw a substantial amount of cash against the check.

For example, on May 26, he deposited a $1,500 check and at the same time withdrew $1,100 in cash. He repeated the same process with similar amounts at two other banks until he walked away with $36,000. On June 1, the first checks bounced and by June 9 the bank determined - as the other banks also would - there wasn't much chance of recovery on the account, and it closed the account citing fraudulent activity.

The three banks notified law enforcement of the losses through a suspicious activity report (SAR). According to the ACFE's Fraud Examiners Manual, effective April 1, 1996, the Office of the Comptroller of the Currency (OCC) requires national banks to submit SARs (12 C.F.R. 21.11, as amended) if there's a known or suspected criminal violation committed against the bank or involving a transaction conducted through the bank, and: the bank has a substantial basis for identifying responsible bank personnel; or the amount involved is $5,000 or more and the bank has a substantial basis for identifying a possible suspect, there's a potential for money laundering, or the Bank Secrecy Act is violated (for example, when a customer appears to be structuring a transaction to avoid the filing of a Currency Transaction Report, such as depositing $9,900 in cash); or the amount involved is $25,000 or more. The bank is then required to report even if the bank doesn't have a substantial basis for identifying a suspect.

All the accounts were opened in the name of Martin Horgan, so, of course, we thought he was our guy. But a review of his criminal history showed that Horgan was in prison in Georgia for an unrelated crime when the bank frauds occurred. So who was the real fraudster? It was time to take a closer look at the evidence.

ARRIVING UNANNOUNCED 

One of the checks that "Horgan" had deposited was a payroll check made out to Mindy Johnson and endorsed over to Martin Horgan. We figured that Johnson might be able to help lead us to the fraudster, but first we had to find her. A records check showed her current address as 2929 Leaf Street and previously at 1502 Jetson St., Apt. 11. This was good news because she appeared to have shared that former address with the fraudster - all his account applications, checks, and bank statements had the Jetson St. address. It was time for Stephen Jones, the FBI case agent, to pay Mindy a visit.

Jones arrived unannounced at 2929 Leaf Street and found Mindy at home. She was willing to tell her story. She knew a Martin Horgan, whom she had met at a bar in early May 2000. At the time, she thought it was great timing because she wanted to move out of her parent's house and this could be her opportunity. She moved in with Horgan and two of his friends, Jack and Wade. Mindy said she didn't know their last names. She said she was the only one who ever came up with the rent money, so after a few months she decided it was time to cut her losses and move out. Mindy loaded most of her belongings in a trailer that Horgan had rented, but while she was back in the apartment packing a few last things, Horgan, Jack, and Wade took off with her trailer full of stuff never to be heard from again.

Mindy said she had stayed out of Horgan's business, but did say there were times when she would sit in his car when he went into different banks. She also said he always carried a large wad of cash. Agent Jones wasn't so sure Mindy was an innocent bystander to the crime, so he asked her to submit to a polygraph exam and handwriting exemplars. The polygraph showed no deception, and the exemplars didn't match the handwriting on the bank records. During the interview, Mindy had mentioned a few other tidbits of information including that Horgan worked at a local store called Old Town Snacks. She also said that he and the two other roommates talked about moving to Florida.

With Mindy cleared of wrongdoing, I took another look at the bank records to see what clues they offered. I checked to see if there were any copies of photo IDs in the bank application paperwork. No luck. If we had had a photo, we could have compared it to the real Martin Horgan sitting in prison and shown it to Mindy. Luckily there were a few clues in the account application paperwork. For one thing, Horgan had presented a Georgia driver's license and written on the application that he was employed at Old Town Snacks - just as Mindy had said. Agent Jones obtained from the state of Georgia a photo ID for Horgan, hoping to establish a connection between the real Horgan in prison and the Horgan opening the bank accounts. Horgan had often listed a Nebraska driver's license on the checks he wrote. We contacted the state of Nebraska, obtained the license information, and found that the physical description closely matched the one on the Georgia driver's license. Unfortunately, at that time, Nebraska didn't maintain digital images of the photos. Another dead end. We had to keep digging.

BREAKTHROUGH CLUE 

Finally, I found an important clue. I had once again been searching the bank records and came across one deposit slip on which was written an Indiana driver's license number. But this time the license didn't come back with Horgan's name but the name of Scott R. Nelson with an Indiana address. Who was Nelson? We got his description: born 1969; height, 5'9"; weight, 160 pounds.; brown hair; and brown eyes. These matched the description Mindy had given of Horgan.

Jones ran a records check on Scott R. Nelson and again we got lucky. He had an extensive criminal history in Florida. Agent Jones made the rounds with Nelson's photo in hand from the Florida county sheriff. Both Scott's former apartment manager at 1502 Jetson Street and Mindy identified the person in the photo as Martin Horgan. It was official; Scott Nelson had been impersonating Martin Horgan. At last we knew who our target was. The trick now was to find him.

Agent Jones went to Old Town Snacks to look at Horgan's employment records and found his emergency contact was Karen Sullivan in Clearwater, Fla. The agent then compared Horgan's Old Town records with Scott Nelson's Florida criminal history and Sullivan's name was in both. The criminal history identified her as Nelson's mother. Further searches revealed that Nelson's prior address in Florida matched Karen Sullivan's. Then we hit pay dirt.

In reviewing the checks "Horgan" had written on the bank accounts, we ran across a $50 check to a local vision care company with the notation that it was "for Scott's contacts." We obtained the vision company's records, which included both a prescription for Scott issued in Indiana and his current address as 1502 Jetson Street, Apt. 11. This was the evidence that confirmed we were looking for Scott Nelson. The assistant U.S. Attorney agreed to indict him under Title 18, United States Code, Section 1344 Bank Fraud. Section 1344 is the broadest of all bank fraud statutes. It punishes those obtaining assets owned or controlled by a bank by false or fraudulent pretenses, representations, or promises. It covers both insiders and all other persons, even if not affiliated with the bank.

WHERE IN THE WORLD IS NELSON? 

We had our indictment, but we needed to find Nelson. One day in November 2001, a Florida policeman stopped Seth L. Nelson. The officer checked for outstanding arrest warrants and found that the FBI was looking for a Scott Nelson who used the alias Seth L. Nelson. The officer detained Seth and contacted agent Jones. Jones faxed the Florida police a photo of Scott Nelson, but Seth and Scott weren't the same person. Seth said the person in the photo was his brother, Scott, and he was in an Arizona jail. But there was no Scott R. Nelson in Arizona prison records. The case ran cold again.

Two years passed. Finally, Seth Nelson called agent Jones and told him he was tired of his brother using his name and destroying his credit. He told us his brother was in an Arizona prison but under yet another alias - John D. Rogers. Agent Jones verified that John D. Rogers actually was jailed in Arizona. Jones sent Scott Nelson's photo to the prison and it was a match. We finally had him.

The arrest warrant was served on Scott in prison in August 2003. In October 2005 he pled guilty. He was then sentenced to five months prison time and five years probation. He also was ordered to pay restitution of $36,000 to the banks. As is often the case, the banks haven't received any of their money back. Since he was already in prison, the sentence was to run concurrently with the prison time he was already serving, which was lucky for him.

LESSONS LEARNED 

• Tenaciously dig through evidence numerous times to discover those hidden clues even if the ninth or tenth look was fruitless.
• Take a break of a day or two from searching through the evidence to give you a fresh perspective when you start rummaging through it again.
• Continually bounce ideas off your co-investigators to possibly discover new angles you hadn't noticed before.
• A $50 check to a local vision company provided further substantiation that we had the correct subject. It's generally prudent to establish minimum-dollar investigative thresholds, but keep your eyes open for that smaller tidbit that might help you solve your case.
• Never give up hope that you'll solve the case. You've got to believe that you have what it takes, but don't hesitate to use other agencies and investigators to assist.

METHODS I USE 

As federal investigators on criminal cases, we have the advantage of obtaining bank records by the subpoena process through the approval of the U.S. Attorney's office. In this case, we knew the accounts to subpoena because they were identified on the SAR. As the financial analyst on a case, I'll often draft an attachment to the subpoena that specifically details the records we're requesting: account applications, bank statements, copies of all deposit tickets and deposited items, checks (both front and back side), all other credit and debit transactions including wire transfers and transfers between accounts will be requested for a specific time period.

We usually set some type of dollar threshold to reduce the copying and research burden on the bank. On the Horgan case, we set the threshold at $100 and above because the case was relatively small.

In some instances we might also request any loan records or other bank documentation. It's helpful to word the subpoena request quite broad - ask for any variations on the name and Social Security numbers and addresses - so you probably won't need another subpoena if there's some slight variation in the account information.

It's often helpful to subpoena credit reports. These subpoenaed records can help you identify the subject's possible loans; by obtaining the loan records you can determine how the borrowed funds are being repaid, which might lead to an undiscovered bank account.

We then scour the received bank records. Endorsements on the back sides of checks (just like wire and bank transfers) can lead me to the subject's other accounts. I study each piece of paper (or the electronic files) one at a time looking at several things including driver's license notations. I also study the vital account applications. I prepare spreadsheets on the records as I analyze them.

Next I prepare reports on my analysis striving to make them concise, easily understandable, and objective. I stick strictly to the facts and don't infer the guilt or innocence of the party. I avoid accounting lingo because the report's audience probably won't be accountants or CFEs. I include charts to simplify the analysis. Everyone loves a picture to tell a story.

All cases are jigsaw puzzles - fitting the pieces together, one at a time. In this case, the SAR led to the bank accounts to analyze, that led to the bank account applications with the name Martin Horgan, that led to a payroll check for Mindy Johnson and then to Mindy Johnson. The records led us to Georgia, Nebraska, and Indiana driver's licenses that finally led us to Nelson's identity. That led us to Nelson's criminal history and his photo that helped us confirm that the fraudster was Nelson based on the positive ID provided by Mindy and the former apartment manager. Mindy and the account applications led us to Old Town Snacks where we confirmed a connection between the criminal history and Nelson's employment records. That led us to Karen Sullivan, Nelson's mother. Another records' search lead to the $50 vision company check that led us to Nelson's indictment. His indictment led to his arrest warrant that led us to Nelson's brother that in the end led us to Nelson.

IN THE WORDS OF CHURCHILL: 'NEVER GIVE UP' 

Scott Nelson might not have stolen a large amount, but I'm sure the banks (and his brother, Seth) were glad that we never gave up even when we had sifted through the evidence scores of times. You are just as smart - and probably smarter - than the fraudster. So don't give up on that seemingly unsolvable case. It could eventually be your most memorable.

Maria S. Hamernik, CFE, CPA, is a financial analyst with the FBI in Omaha, Neb. (The views in this article don't necessarily represent the views of the FBI.) 

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