Fraud Ring Leader Sentenced in $69 Million Scheme

Seven years after two Pennsylvania credit unions detected suspicious account activity that led federal investigators to uncover a $69 million tax refund scheme, justice finally caught up with one of the leaders of the national fraud ring last week.

U.S. District Judge David S. Cercone in Erie, Pa.  sentenced Doherty Kushimo, 56, of Providence, R.I. to eight years in federal prison on Sept. 18. Earlier this year, he pleaded guilty to conspiracy to commit wire fraud and aggravated identify theft. He was ordered to pay $335,725 in restitution.

Kushimo was sentenced in Erie because in 2012 the $302 million Widget Financial Federal Credit Union reported to the FBI that there were accounts opened by a person living outside of Pennsylvania and that each account application contained stolen identify information, including names, Social Security numbers, dates of birth and telephone numbers. Federal investigators determined Kushimo opened some of those accounts.

However, the $5.3 billion Pennsylvania State Employees Credit Union, one of the nine cooperatives named in court documents, reported the federal tax deposit fraud to the IRS in 2011. The Harrisburg, Pa.-based credit union also blocked five other accounts associated with the scam, but its impact on PSECU was negligible, according to the credit union.

Kushimo and more than 20 other co-conspirators across the country traded stolen identities via email that were used to open credit union and bank accounts to file fraudulent federal tax returns. The credit union and bank accounts were then used as repositories for federal tax refunds, which were obtained by filing the fraudulent federal tax returns using the stolen identities.

After Widget Financial FCU tipped off the FBI, the investigation revealed that stolen identities were used to open thousands of fraudulent credit union and bank accounts across the U.S. since at least 2005.

Although nine credit unions from seven states and the District of Columbia were named in court documents, few CEOs acknowledged their cooperatives were affected, while others said that their credit unions were not involved at all.

In addition to Widget Financial and PSECU, court documents named the $171 million Treasury Department Federal Credit Union in Wash., D.C., the $416 million Air Force Federal Credit Union in San Antonio, the $760 million Red Canoe Credit Union in Longview, Wash., the $89 million Rutgers Federal Credit Union in New Brunswick, N.J., the $5.9 billion Lake Michigan Credit Union in Grand Rapids, Mich., the $83 million Windward Community Credit Union in Kailua, Hawaii, and the now-merged CWA Long Island FCU.

PNC Bank of Pittsburgh was also named in court documents. In addition, Kushimo attempted to open accounts at First American Bank, Barclays Bank, Perkstreet Financial, Standard Bank & Trust and Century Bank.

Kushimo’s cell phone records revealed that over 10 months, he called 100 financial institutions in 22 states to open accounts with stolen identities. He also made numerous calls to co-conspirators who were committing the same crimes.

When investigators searched his Rhode Island home, they found more than 1,000 credit cards that were obtained using stolen identities with a total credit availability of $10.5 million. In a shoebox, investigators also found more than 50,000 stolen identities in addition to paperwork that listed hundreds of bank and credit union accounts opened with fake IDs.

The conspiracy at large involved more than 11,000 victims and thousands of credit union and bank accounts all over the country, prosecutors said.