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Post-9/11 Thefts From ATM Lead to N.Y. Arrests

Crime: Up to 4,000 people may have been involved in stealing up to $15 million from a credit union, authorities say. Sixty-two people have been held.

August 06, 2002|JOHN J. GOLDMAN | TIMES STAFF WRITER

NEW YORK — Up to 4,000 people are being investigated for allegedly stealing $15 million from a credit union during the confusion after the terrorist attacks on the World Trade Center, prosecutors said Monday.

So far, 62 people have been arrested, and authorities are seeking 39 others in the widening inquiry. Many are New York City employees.

Manhattan Dist. Atty. Robert M. Morgenthau called the scheme one of the largest fraud cases to emerge in the aftermath of the collapse of the twin towers Sept. 11. He added that the $15 million was a "hard figure" and not a "pie-in-the-sky" estimate.

At a news conference with Police Commissioner Raymond W. Kelly, Morgenthau said the attack damaged the Municipal Credit Union's ability to ensure that members' accounts contained sufficient funds to cover withdrawals from the credit union's automated teller machines.

The credit union's computer system, in a building near the trade center, suffered power outages and phone problems after the attack. But credit union officials decided not to shut down the ATM operation, recognizing that doing so could cause even more hardship for members affected by the tragedy.

"This is a prime example of 'no good deed goes unpunished,' " Morgenthau said. "People took advantage."

Authorities said some credit union members who were arrested withdrew the maximum of $500 a day when their accounts had minuscule balances.

Some went on spending sprees for jewelry, liquor, clothing, shoes, leather goods and electronic equipment.

"People tried to profit from the confusion," Kelly said. " ... For a while, they got away with it."

Authorities said a nurse at the Manhattan Psychiatric Center made 54 withdrawals from automated teller machines starting seven days after the attacks, even though her balance was already overdrawn. By the end of October, the nurse had collected $18,111--which she never arranged to pay back.

An employee of the New York City Housing Authority, whose credit union balance during the eight months before the attack never exceeded $130, allegedly made 53 withdrawals and then used a Visa card to make 101 purchases. He owes the credit union $10,378.

A Police Department school safety agent who never had more than $245 in her account in the eight months before Sept. 11 used ATM machines 80 times and took out $11,344, authorities said. She allegedly made multiple withdrawals on some days.

Those arrested included employees of the Board of Education, the transit authority, the Department of Health and the Housing Authority.

Each had taken advantage of the credit union's operational problems to withdraw at least $7,500 in the weeks after the attacks.

When the losses were discovered in October, people who had overdrawn their accounts were offered loan repayment agreements by the credit union. Those who refused to sign or ignored notices from a collection agency were arrested. They were charged with third-degree grand larceny, which is punishable by up to seven years in prison.

The investigation began in November when credit union officials approached police, the city's Department of Investigation and the Manhattan district attorney's office.

Prosecutors and police said the arrests announced Monday were just the most prominent part of the problem. Audits have found that more than 1,700 members overdrew their accounts by at least $3,000, and more than 4,000 by at least $1,000.

A large number have made few or no repayments.

Morgenthau estimated those who were arrested or were being sought withdrew about $800,000.

"It was a free ride.... Some started off small. Then they started taking the maximum they could," the district attorney said.

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