Originally published 2:00 a.m. May 14, 2009, updated 10:32 a.m., May 14, 2009
Depositing counterfeit checks and withdrawing the cash before banks discover they are fake is a common crime that happens several times a day in San Diego County.
But having a street gang behind a conspiracy that caused a credit union to lose $500,000 could be a first in state history.
State and federal law enforcement officials made that announcement yesterday morning with the arrests of 40 people in the check-cashing scheme, including some active members of the military. Twenty more people are being sought.
“This is the first time a violent street gang has been targeted for its involvement in complex bank fraud in California,” District Attorney Bonnie Dumanis said. “It clearly shows gangs are moving from street corner drug dealing and pimping to complex fraud.”
Of the 60 suspects who have been identified, 16 are documented members of a gang that claims San Diego's Lincoln Park neighborhood as its territory, authorities said.
Many of the defendants are not in the military but are somehow affiliated, either by working on a base or through a relative. That gave them membership to Navy Federal Credit Union, which absorbed the losses.
Three members of the Marines, one member of the Army and one member of the Navy have been identified as suspects. Two have been arrested.
During a news conference, Dumanis explained that gang members would create a fraudulent check and then have a credit union member deposit it into his or her account. The member would then travel to Barona Casino and withdraw the money before the credit union could determine that the check was counterfeit.
The checks ranged from several thousand to tens of thousands of dollars, and the account holder would receive a commission of several hundred dollars.
When Navy Federal contacted the credit union member about the fraud, the account holder would say that his or her identity had been stolen and would sign an affidavit swearing to that. The credit union would then absorb the loss.
Gang members also were indicted in a mortgage-fraud scheme last month. Dumanis noted the trend of gangs getting into more sophisticated crime and vowed to prosecute them.
The credit union fraud started in 2005 and was used to pay for luxuries such as new cars, clothing and jewelry, San Diego Police Chief William Lansdowne said. Authorities do not believe the money was used to finance more crime.
“This one was surprising to us,” Lansdowne said. “There was no financial plan in this. It was take it and use it.”
In 2008, an investigator at the credit union noticed a pattern among the transactions: Most of the people were similar ages, all of the withdrawals were made at Barona Casino and the checks looked alike, Deputy District Attorney Joan Stein said.
The credit union contacted the U.S. Secret Service, which started a 10-month investigation.
Authorities said Barona was used because the ATMs there, which are not owned by the credit union or the casino, allow much larger withdrawals.
The casino's surveillance system played an important role in the investigation, Edwin “Thorpe” Romero, chairman of the Barona Band of Mission Indians, said in a news release.
Some account holders admitted their role in the fraud, but gave agents incomplete names or nicknames to identify the ringleaders. The agents turned to San Diego police for help, and gang-unit detectives identified the leaders, Lansdowne said.
As law enforcement officers began interviewing people in December, the fraud stopped. Authorities also believe the equipment used to make the counterfeit checks was disposed of at that time.
On Tuesday, law enforcement officials spread out around the county to make arrests. Suspects were brought to the Qualcomm Stadium parking lot for processing.
Superior Court arraignments are scheduled to begin today. Account holders will probably be charged with fraud, a felony, which carries a maximum sentence of three years in prison. Because many of them have no criminal record, they will probably be sentenced, if convicted, to probation and ordered to pay back the credit union, said Stein, the prosecutor.
The implicated sailors are believed to be account holders.
The Naval Criminal Investigative Service was involved in the investigation.
The ringleaders face maximum sentences of about 17 years in prison, Stein said.
Staff writer Dana Littlefield contributed to this report.