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The Sierra Madre Skimming Scam

by Neal O'Farrell on January 14th, 2011

On our Twitter feed and this blog, you hear me talk a lot about what is happening in the headlines. These stories vary from arrests (chalk one up for the good guys!) and the warnings of all the criminals out there. As it is in remaining alert and vigilant in anything, knowledge and awareness are your best resources; so keeping up with the current events centered around identity theft is a good practice.

This brings me to a story that broke back in December, shortly after Christmas.  Sierra Madre is a small, sleepy Southern California town in the foothills of the San Gabriel Mountains. This picturesque haven, known more for its local breweries, hiking trails, and day spas, has been suddenly thrust into the national spotlight as a crazy story about how an ambitious skimming scam has law enforcement focused on one of the city’s few gas stations.

What probably drew law enforcement’s attention to this quaint little town was a string of hundreds of reports of credit and debit card frauds tied to this isolated gas station, in a town that has only around 10,000 residents.

The first signs of a problem began to emerge just a couple of days after Christmas, when a customer of the gas station reported an unauthorized charge on her credit card. That one report opened the floodgates and by the end of the day local law enforcement were dealing with more than 175 separate complaints of credit and debit card fraud, all connected to that one location. It quickly became apparent that the gas station and many of its customers were victims of “skimming gangs,” something I’ve discussed before on ID Guardian.

At least, that was how it appeared, at first.

Within a matter of days the number of victims totaled more than 230, all connected to that small – and now closed – gas station. The immediate suspicion was that the gas station had been hit by “skimmers” – card reading devices placed over or even inside the real card reader and used to steal copies of credit and debits cards used by customers. That theory was dismissed, however, when law enforcement reported they were unable to find any sign of skimming.

In the days that followed, the number of victims steadily climbed, nearing the 300 mark with reported losses of more than $80,000. Reports emerged of cards used at that station were also being used to make purchases and ATM withdrawals not just in sleepy Sierra Madre but all around the country.

That’s when the Secret Service got involved.

Last week, what this gas station owner was up to became unraveled. Multiple skimming devices were finally discovered at the gas station. So at least law enforcement now knew what was behind the scam. Now if they could only figure out whom. Skimming is such an easy crime that few of its masterminds usually ever get caught. This time, though, there was a huge clue that law enforcement could not miss: the owner of the gas station had closed his business and left town. When did the owner skip town?

Just after Christmas. Fancy that.

As of today the total number of known victims has reached nearly 400, with more than $100,000 in reported losses. No word yet on the whereabouts of the gas station owner, who apparently had owned the gas station for less than a year.

This intrigue has me wondering: If the gas station owner is the alleged mastermind, what happened? Did he simply fall on hard times and turn to fraud to save his business? Or was he a crook who bought a gas station at a small remote town with the specific intent of turning it into a massive skimming operation?

The timing and  circumstances around this scam suggests he may have banked on most of his customers not checking their financial statements until early in the New Year, giving him even more time to rip-off more customers and be long gone before anyone noticed.

If my latter theory turns out to be true, this Sierra Madre Skimming Scam really ups the stakes in one of the toughest frontline battles against identity theft.