A tipster walked into the FBI’s South Florida office a few years ago to complain that young cyber criminals in the North Miami area were using something called a “key” in street lingo to steal people’s identities.
That key, FBI agents would soon figure out, was really a combination of names, birth dates, home addresses and Social Security and driver license numbers — all purloined from five different business and government web sites that were “systematically hacked.”
That discovery led to the November arrests of 18 Miami Dade College students, who were charged with using their financial aid accounts to receive fraudulently obtained tax refunds from the federal government.
Those former and current students face upcoming trials — and the grim prospect of prison sentences — but authorities say the case is far from over.
In coming months, they expect more arrests of MDC students on charges of stealing personal identities and government funds. And the investigation also now extends beyond Miami Dade, with students at other yet-to-be named Florida colleges and universities also under scrutiny for similar scams involving student accounts administered by a Connecticut-based financial services company called Higher One.
“There are other institutions where this is occurring,” U.S. Attorney Wifredo Ferrer said in a recent interview, calling the abuse of Higher One accounts a “statewide problem.”
After unraveling the “key,” FBI agents eventually discovered scores of MDC students and collaborators were using the stolen identities to file millions of dollars in fabricated income-tax returns. Then they had electronic refunds deposited into the students’ Higher One accounts, which are supposed to be for receiving financial aid and paying tuition.
Agents contacted Higher One about the suspicious “laundering.”
“Higher One found ... over 1,000 accounts that had multiple Treasury checks going into student accounts,” FBI special agent Kristen Mulder testified at the June 2014 trial of one of the first students convicted of tax fraud. Over the last several months, federal authorities say they have found hundreds of other tainted Higher One accounts held by MDC students. All of the suspect bank accounts have been frozen.
Ferrer said many students simply allowed their accounts to be used to launder the refunds for kickbacks ranging from $100 to $1,000 each. But some of those students also participated in the theft of IDs and submitted phony tax returns themselves and still others recruited fellow students to allow their bank accounts to be used for receiving tainted refunds.
“That this crime has infiltrated life at a college is alarming,” Ferrer said after the takedown of the worst MDC offenders in November.
He said the Higher One scam is “further evidence of the insidious and widespread nature” of stolen IDs and tax-refund fraud in South Florida. The region has been considered the capital of these twin crimes since they began spreading five years ago. Although the IRS won’t break down the extent of the problem in each metropolitan area of the country, officials say the hardest hit areas are South Florida, Atlanta and the District of Columbia.
The Government Accountability Office, which has been analyzing the problem for Congress, highlighted in a new report that the Internal Revenue Service paid an estimated $5.2 billion in refunds obtained from about 900,000 fraudulent returns during the 2013 tax filing season. At the same time, the GAO report said, the IRS blocked $24.2 billion in refunds sought from about 4.1 million fraudulent returns.
“However, the full extent of [identity-theft] refund fraud is unknown,” the report warned.
The scheme involving college students is just the latest in the string of South Florida fraud rackets.
Collectively, the 18 college students — along with three Target department store employees named in one case — are accused of using Higher One bank accounts to receive about $500,000 in fraudulent income-tax refunds between 2011 and 2013. (The online accounts are managed by traditional banks, such as Chase, Wells Fargo and Bank of America.) In total, the defendants used the stolen IDs of 644 victims while trying to collect $1.9 million in IRS refunds, according to the U.S. attorney’s office.
A spokesman for Miami Dade College, which has about 70,000 full-time students, said he could not comment on the disciplinary status of any students implicated in the alleged tax fraud scheme because of privacy laws.
“Students who allegedly participated in the fraud volunteered their own accounts to have tax refunds from illicit returns deposited in their accounts by [the] IRS,” college spokesman Juan Mendieta said.
“Higher One has mechanisms and controls to detect abnormal movement in accounts that helped bring issues to light,” he added. “These mechanisms have always existed and that is how Higher One was able to collaborate with investigators.”
A spokeswoman for Higher One, which provides banking services to colleges and universities nationwide, praised the criminal prosecutions.
“We have been working with the authorities on these types of cases in southern Florida for some time now,” said spokeswoman Lauren Perry. “Our system flags suspicious account activity which, through our bank partners, we report to the applicable authorities.”
According to authorities, Higher One not only turned over subpoenaed bank records of MDC students but also provided ATM video recordings of students and their collaborators withdrawing money their accounts.
Some highlights from 14 MDC-related cases pending trial:
▪ Caleb Fadet, 27, of Miami Beach, charged with theft of government property, is accused of receiving $10,400 in refunds in the names of 12 unsuspecting taxpayers — including seven deposits electronically made by the IRS into his Higher One account on a single day.
▪ Laquisha Q. Johnson, 24, of Opa-Locka, faces the same charges alleging she received three fraudulent tax refunds in her Higher One account — including a deposit of $61,000 illegally obtained in the name of one victim.
▪ Glasner Simplice, 20, of Miami, is accused of fleecing two government agencies: IRS tax refunds for $53,000, and Social Security benefits for $19,000 — all deposited into his Higher One account.
▪ Erving Etienne, 21, of North Miami Beach, is charged with receiving nine tax refunds totaling more than $6,200, including four deposits on the same day — though the IRS blocked 83 other refunds directed into his Higher One account.
In one case, six defendants — including three who worked at Target but were not enrolled at MDC — conspired to steal $98,500 in IRS refunds that were deposited into Higher One student accounts. One such account held by Sandy Jean-Louis, 21, of North Miami, received tax refunds in the names of 37 taxpayer victims, according to an indictment.
Before the U.S. attorney’s office unveiled these cases in November, prosecutor Gera Peoples obtained convictions of three MDC students in 2013 investigations that exposed fraudulent tax refunds being deposited into Higher One accounts.
The biggest case was made against Kevin Cimeus, 22, of North Miami. He was sentenced to 13 years in prison after he was found guilty last June of possessing about 2,500 Social Security numbers found on his two laptop computers and submitting fake tax returns to the IRS. Court records show he electronically filed more than 50 returns seeking about $248,000 in fraudulent refunds.
In his defense, Cimeus tried to show that he was simply a pawn in the scheme and that higher-ups were responsible for stealing all those Social Security numbers and filing those bogus returns. But his strategy backfired.
Cimeus, who was poised to graduate from Miami Dade College last year, described himself in court as a “product” of a poor Haitian-American immigrant community, where authorities say ID theft and tax fraud crimes have become commonplace among young adults.
“I see this crime as an environmental crime,” Cimeus told a federal judge last June. “I’m a product of my environment, and this is an environmental crime.”