TO: IAFCI

FROM: J.R. GOODMAN, U.S. POSTAL INSPECTION SERVICE

DATE: NOVEMBER 2002

RE: FRAUD ALERT

On April 4, 2001, two members of a multi-million dollar fraud ring were arrested, and search warrants were executed at their Fifth Avenue, Manhattan office as well as at the home of the main suspect, Victor Einhorn. Einhorn, a member of the ultra religious Hasidic Jewish community in Monsey, NY, has allegedly defrauded a variety of businesses and individuals, including major airlines, airline passengers, rental car companies, (see IAFCI member Ed Hart, Avis Security and Ed Parsons, Hertz Security) leasing/financing companies, financial institutions and other domestic and foreign business of millions of dollars. Einhorn and others defrauded the travel industry by allegedly creating fraudulent travel agencies, or by purporting to buy existing agencies, using the transition period to exploit the credit system that exists between the airlines and legitimate agencies.

While the alleged schemes varied from one travel agency to the next, Einhorn and others typically would be paid by a traveler’s credit card company for the reservation and ticket. They would then substitute a fraudulent credit account as the form of payment on the ticket, leaving that account unpaid. (see Celeste Thomas, AMEX, Jim Nicholas, JP Morgan Chase). The fraud accounts were sometimes lulled by payments with counterfeit checks. (see Fleet investigators). Sometimes Einhorn would be paid twice for a stolen ticket by later requesting a refund as an innocent owner of the fraudulent credit account. By the time each travel agency’s credit was exhausted, the members of Einhorn’s organization would typically have also ordered hundreds of thousands of dollars of business or electronic equipment, and then disappear with the merchandise and the agency’s ARC ticket supply. (see IAFCI member Dave D’Onfrio, ARC).

In addition to bogus travel agencies, Einhorn allegedly created a network of non-existent companies ranging from real estate agencies and computer software companies, to a medical clinic, in order to establish equipment leases, order electronic or computer equipment and obtain corporate credit accounts. He also posed as the owner of a non-kosher restaurant that allegedly catered a bar-mitzvah and charity benefit dinner for members of the Hasidic community in a scheme to defraud Diners Club International, as well as members of his own community. (See IAFCI member Steve Gilbert, Diners Club / Citibank). Currently, the total fraud amount reported for all these schemes is $13.5 million.

Subsequent to a 1999 state arrest for credit card fraud at a Sears store, the Inspection Service obtained a briefcase belonging to Einhorn from the Hudson County, NJ Prosecutor’s Office. The briefcase contained over one hundred credit cards and volumes of evidence linking him to fraud schemes. Among the evidence recovered were a fraudulent French drivers license, a County Sheriff’s “Advisors” badge and credentials, an emergency strobe light and siren, a sheet of blank NY State DMV registration cards, (see IAFCI member Cindy Krumholtz NYDMV) New York City Sheriff vehicle seizure stickers and CMRA agreements

The search of Einhorn’s office space on 4/4/ 2001 revealed evidence that numerous frauds relating to equipment leasing, insurance claims, medical billing, phone cards, identity theft and credit card fraud were ongoing and the manufacturing of fraudulent law enforcement parking placards, French Drivers Licenses, and other fraudulent documents.

On April 5, 2001 Einhorn was released on $1.5 million PRB secured by $1 million in property, 4 co-signers and a host of other special restrictive provisions (e.g. he is not allowed to use a credit card except for a medical emergency, he cannot work in the travel industry). On April 11, 2001, Inspectors applied for Einhorn’s bail to be revoked, and re-arrested him based on his failure to turn over his passport, his alleged failure to disclose to pretrial service his true residence, a luxury condo in Manhattan, and other information indicating he was planning to flee to Costa Rica. At a bail hearing on April 12, 2001, a Federal Magistrate revoked Einhorn’s bail. Einhorn appealed the bail revocation to the appellate court. After a two day hearing, Einhorn’s bail was re-instated with electronic monitoring by bracelet, and contact every 24 hours with the court. During the hearing in appellate court, Inspectors executed a search warrant at his secret luxury condo in Manhattan, which produced more evidence of his alleged fraud schemes, real estate he had purchased and many credit cards. The investigation is continuing against other targets. Einhorn, Roitman, Stern and Olivo’s trial has been scheduled for November 4, 2002 in Federal District Court for the Southern District of New York.