Fraud: Crime against business, consumers increasing

Identity theft is the No. 1 form of consumer fraud in the nation, according to the U.S. Postal Inspection Service and Springfield is not immune.

Just last week The Classy Dame owner Terry M. Heitman was sentenced to three years and 10 months in federal prison for a fraud scheme in which he used stolen identities in one case a customer's to charge more than $24,000 via credit cards.

While it's no Enron, Heitman's fraud has broad implications locally because it may raise questions as to the integrity of other local merchants, said Greg Nutting, general manager at Maschino's Home Expressions.

"My hope is that each case is viewed individually and that (Heitman's case) is not to be generalized to other local Springfield businesses," Nutting said.

"We have a trust with (customers)," Nutting added. Nearly 60 percent of transactions at Maschino's are via credit card.

To keep client information secure, businesses must have safeguards in place. Here's how a few companies accomplish that.

Internet fraud

At least 80 percent of the Springfield Police Department's fraud cases involve credit card theft and check forgery, according to Matt Brown, public information officer. But the fastest growing fraud is from Internet transactions, Brown said.

With e-commerce rapidly expanding, due largely to E-bay, Internet businesses must shield customer information from a growing number of hackers.

Springfield-based Decorize.com, for instance, limits employee access to its customer database and changes user names and passwords every six months. It also has a firewall to protect its Web site.

Decorize.com is a business-to-business retailer of imported furniture.

"There would be a real problem if someone got their hands on our database," said Tom Hunt, Web master for Decorize.com.

Hunt said only two accountants and a few server administrators have access to business customers' credit card numbers stored in the database.

"Each employee who needs access to the back-end section of the site is given a unique user name and password," Hunt said. "I revoke (the passwords) and terminate the accounts once an employee leaves the company."

Brown warns that e-commerce customers should always check that the Web site is secure with 128-bit encryption. The most-common browsers, Internet Explorer and Netscape, are secure. According to the U.S. Postal Inspection Service, there are two ways to check if a Web page is secure:

An icon of a lock appears at the bottom of the Web browser page; and

The URL changes from "http" to "https" for the page at which personal data is entered.

Anyone suspecting he or she might be a fraud victim should call the Police Department immediately, Brown said. "Our resources are almost unlimited when it comes to tracking these things down," he said.

Banking fraud

Although there are about 10 different varieties of fraud that banking institutions face, check forgery is the most frequent, according to Cindy Harding, assistant vice president and fraud prevention specialist at Empire Bank.

The amounts associated with forgery are generally small, however.

Empire Bank uses a fingerprinting system as a stopgap to forgery. It gets fingerprints of noncustomers who are cashing checks.

Two bigger problems, in terms of dollar amounts, are counterfeit checks and check kiting, Harding said.

Kiting is artificially inflating an account balance by depositing checks from another bank account that will not clear.

"Counterfeit checks are just rampant," Harding said, largely due to software on the market that allows consumers to print on check stock.

Although the software has a legitimate business purpose for companies that print their own checks, banks get hurt when it's in the wrong hands.

One counterfeit check cost Empire Bank's holding company $80,000 last year. So far this year Empire Bank has worked 45 fraud cases, which had potential losses of more than $250,000.

Last year the bank reported and worked 339 fraud cases throughout its system with a total exposure of more than $750,000, Harding said.

Banks also must protect their funds from insider fraud. Citizens National Bank President Frank Hilton said it is common for banks to lose small sums of cash occasionally.

"We're probably no different than any other bank. We have had a few small isolated occurrences, mysterious disappearances of small amounts of cash," he said. "That's pretty common."

Surveillance cameras are used to monitor both customers and employees, Hilton said.

State steps

The state of Missouri is taking a step to defeat identity theft among other things with new-look driver licenses and identification cards.

Security features such as digital ghost photos, ultraviolet ink patterns and two-dimensional barcodes on the back of licenses are aimed at curbing fraudulent acts.

"We hope these features will help prevent fraud," said Jessica Robinson, spokesperson for the Missouri Department of Revenue.

The new cards are expected to arrive in Springfield later this month. St. Louis, Kansas City, Columbia and Jefferson City already have unveiled the new licenses.