Gift card scams

[<rms () bsf-llc com>]

http://online.wsj.com/article/SB116174264881702894.html?mod=technology_featu
red_stories_hs
 
As Shoplifters Use High-Tech Scams, Retail Losses Rise 

Another vexing new problem, retail executives say, is gift-card fraud. Many
retailers now issue gift cards in place of paper gift certificates and
receipts from returned merchandise. The cards, which resemble credit cards,
have been a boon to the retail industry, accounting for $60 billion in sales
last year, almost one-third of it during the holiday season.

But they've also been a boon to thieves. In one scam, crooks copy numbers
from gift cards hanging on store racks. After the cards are purchased and
activated, buyers use them to shop online by entering the card numbers.

So do the thieves. To figure out which cards have been activated, they phone
an 800 number to check on balances for card numbers they've copied. When
they discover activated cards, they use the card numbers to buy merchandise
on a store's Web site, explains Dan Doyle, vice president of loss prevention
at Beall's Inc., a Southeastern department-store chain.

Another swindle involves stealing merchandise, then returning it for store
credit in the form of gift cards. In 2003, Herion Karbunara, a Massachusetts
man in his mid-20s, paid women $50 to $200 a day to shoplift merchandise
from stores ranging from Pottery Barn to Victoria's Secret and then return
it for gift cards, according to the Massachusetts attorney general's office.
Some stores required receipts for returns, so the women first would buy one
of each product they intended to steal, prosecutors say. Mr. Karbunara would
scan the receipts into a computer and print counterfeits, they say.

The Internet has emerged as a preferred method for crooks like Mr. Karbunara
to unload gift cards. After fraudulently obtaining about 600 such cards, Mr.
Karbunara offered them for sale on eBay
<http://online.wsj.com/quotes/main.html?type=djn&symbol=ebay> . The
Massachusetts attorney general's office says online sales netted Mr.
Karbunara $200,000 over 10 months. In late 2004, he pleaded guilty to three
counts of larceny and one count of forgery, and was sentenced to two years
in state prison.

Retailers responding to a National Retail Federation survey last year
estimated that 70% of gift cards sold in eBay were fraudulently obtained,
either through scams like Mr. Karbunara's or purchased with stolen credit
cards. Mr. LaRocca, the federation's loss-prevention chief, says the group
raised a "big stink" with eBay, which eventually changed its policy. EBay
now limits sellers to posting one gift card per week, with a value of no
more than $500.

When the National Retail Federation scrutinized gift cards sold on eBay on
Sept. 14, says Mr. LaRocca, it identified more than a dozen auctions
involving sellers who had violated eBay's policy by listing more than one
gift card a week. "Although we have been talking with eBay, the
conversations have clearly not been fruitful to date," says Mr. LaRocca.

Hani Durzy, an eBay spokesman, says the company changed its policy in an
effort to thwart criminals. Listings are policed by eBay investigators, he
says, and its 203 million users also alert the company to potential
violations. With upward of 100 million items for sale on eBay at any given
time, and seven million new items added every day, staying on top of every
listing is difficult, he says.

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