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Date: 2 Sep 91 11:04:00 CDT From: JOHN WINSLADE <winslade@zeus.unomaha.edu> Subject: ATM - Bank Fraud >From the February 12, 1989 {Omaha World-Herald} "Bank to Reissue 7,700 ATM Cards" Los Angeles - Bank of America has sent letters to more than 7,000 customers of its automated teller machine system, explaining that they will receive new cards as a result of an aborted scheme to steal up to $14 million from the bank's machines around the country. An elaborate scheme to use more than 7,700 counterfeit cards to obtain cash from the bank's Versatel ATM network was disrupted last weekend by U.S. Secret Service agents who had spent the past month working with an informant, according to court documents. Four Los Angeles-area residents, including an employee of a computer programming company who is accused of masterminding the scheme, and a Lincoln, Neb., man were arrested and charged with violating federal fraud statutes. The people charged were identified as Mark and Jackie Koenig, a husband and wife; Koenig's brother Scott, who lives in Lincoln; Mrs. Koenig's sister, Bobbie Jo Bobby; and a friend of the group, Robert Hussey. Seized in the raid were 1,884 completed counterfeit cards, 4,900 partially completed cards and a machine to encode the cards with Bank of America account information, including highly secret personal identification numbers for customers, according to court documents. The group planned to fan out across the country to use the cards for six days before and during the long President's Day weekend, according to the charges. The holiday weekend was intended to provide more time to accomplish the task. "We estimate right now that the loss, had they been permitted to go forward, would have been between $7 million and $14 million," said Carolyn J. Kubota, the assistant U.S. attorney handling the case. ATM fraud is a growing problem for financial institutions. Over the Veteran's Day weekend last October, Security Pacific National Bank in Los Angeles lost nearly $350,000 from 300 customer accounts through its ATM network. The crime remains unsolved. Customers do not lose money from this type of fraud because they are reimbursed for any charges to their accounts. In the Bank of America case, the alleged scheme was stopped before a significant amount of money was stolen. Court records stated that three "test" cards had been used successfully, but only a small amount of money was taken in the tests. Mark Koenig worked as a computer programmer for Applied Communications Inc. of Omaha. He was temporarily working under contract for a subsidiary of GTE Corp. that handles the telecommunications company's 286 ATM machines at supermarkets and stores in California. According to the Edwards affidavit, an Omaha friend of Mrs. Koenig came to the Secret Service last month and said she had been asked to participate in the scheme. The woman, who was not identified, agreed to cooperate with the government and wore a concealed tape recorder to a meeting at the Koenig's apartment Jan. 27th. ***************************************************************** *** The following article accompanied the above information: "ACI Security Is Intact, Official Says" A scheme to misuse automatic teller machines did not violate any security systems or endanger any funds held by banks that use systems produced by Applied Communications Inc., an Omaha-based division of U.S. West Inc., an ACI officer said Saturday. "It's not a breach of our security system," said Ray Croghan, president of ACI. "It's something that anyone who had access to that data could have constructed. It didn't require any specialized knowledge of a computer to accomplish what he did." Croghan was referring to an alleged plan by a group of people, headed by a Los Angeles man who worked for ACI, to steal up to $14 million from Bank of America automatic teller machines around the country. In an interview, ACI President Croghan said Koenig apparently used a personal computer at home to develop the scheme, using ATM card numbers and personal code numbers he knew because of his duties while working on assignment for a subsidiary of GTE Corp. "None of our systems are at risk," Croghan said. "Their plan was to jackpot the ATM's over the President's Day holiday." He said senior technical people at every financial institution that uses ATM systems have access to similar numbers. The knowledge is necessary to maintain and operate the ATM system, he said. "Our immediate concern is to make sure we work with our customer (Bank of America) to protect the integrity of their system," Croghan said. ********************************************************************* Date: 2 Sep 91 11:04:00 CDT From: JOHN WINSLADE <winslade@zeus.unomaha.edu> >From the February 19, 1989 {Omaha World-Herald} "Fraud Plot Allegations Stun Some" "Ex-Omahans Indicted in Bank-Card Scheme" By: David Thompson Mark and Jacklyn Koenig appeared to be a "nice, clean-cut young couple" while they lived in a Sarpy County condominium, according to friends and former associates, who said they were shocked about the Koenig's alleged involvement in a massive bank fraud scheme centered in California. The Koenigs were among five people indicted last Friday in Los Angeles in allegedly participating in a scheme to produce about 7,700 counterfeit automatic bank teller cards. Authorities contend that the five planned to use the cards this President's Day holiday weekend to steal money from Bank of America by withdrawing funds from automatic teller machines in Lincoln, San Diego, San Francisco and Sacramento. Monday is President's Day, a federal holiday, and most banks and savings and loans will be closed. Indicted with Koenig, 28, and his 33-year-old wife, both now of Ladera Heights, Calif., were Scott K. Koenig, 26, of Lincoln; and former Omahans Bobbie Jo Bobby, 20, of Ladera Heights, and Robert G. Hussey, 29, now living in Marina del Ray, Calif. Scott Koenig is Mark's brother. Miss Bobby is Mrs. Koenig's sister. All five are charged with conspiracy to produce and use counterfeit access devices. All but Scott Koenig are charged with additional counts of producing or using the cards or possessing equipment to make them. All are free on bail except Mark Koenig, who has not posted his $100,000 bail. Secret Service agents learned of the plot from an informant, officials said. They said it was the largest such scheme ever uncovered in the nation. "The losses could have been staggering - $14 million or more," said Kirby Hutchison, agent in charge of the U.S. Secret Service office for Nebraska and Iowa. The group had already tested the cards at several teller machines in Nebraska and California and obtained about $5,000, Hutchison said. Mark Koenig was described by friends as a computer wizard. He designed a program that enabled people who conduct triathlons - an athletic event that combines swimming, bicycling and running - to rank participants by their performances based on age, sex and other categories, said Todd Samland of Omaha. Samland, who stages triathlons, was swimming coach for the Koenigs while they lived in the Omaha area. Samland said both Koenigs were active in triathlons. "Jackie was the more successful triathlete of the two," he said. "She was into the training part, and she was a very good middle-endurance person - a one-mile swim, 20 to 25 mile bike ride and a six-mile run." "Mark was gadget-conscious. He was always talking about how he could adapt something that would help him in a race." Charges this month against the Koenigs and the indictments Friday "caught us all by surprise," Samland said. Chris Blumkin, a spokeswoman for Koenig's former employer in Omaha, Applied Communications Inc., said Koenig came to the firm "highly recommended." "He had a security clearance from the U.S. Department of Defense, so he had been pretty thoroughly investigated," she said. "He was a good employee." She said Koenig worked for ACI from fall 1985 until Feb. 6 of this year, when the company was notified of his arrest. He was assigned to ACI's technical consulting division and sometimes was sent to other cities and other countries under contract with companies that needed computer services, she said. Mrs. Koenig reportedly worked in computer sales, although that could not be verified. The Koenigs moved to Omaha from Lincoln in 1984. They remained here until early 1988, when ACI assigned Koenig to London for two months. Mrs. Koenig moved to Los Angeles, and when Koenig completed his work in London, he joined her. He continued to work for ACI under contract and was assigned to GTEL, a Long Beach, Calif., subsidiary of GTE Corp when he was arrested. When they moved to Omaha, the Koenigs lived for less than a year at 3380 South 127th Ave. In 1985, they bought a condominium in the Meadows subdivision in Sarpy County. "They were nice people, pretty sharp too," said LaVance Bennett, who lived next to their unit at 8707 Meadows Parkway, south of Millard near the intersection of Highway 50 and Giles Road. "I was impressed with them, although we didn't get to know each other real well. They did come over once when they locked themselves out and had to call a locksmith. I'm really surprised at what happened with them." Leo Krauth, who was president of the Meadows homeowners association when the Koenigs moved in, called them "real clean-cut, very friendly people." "They were both hard workers and put in some long hours, it seemed," Krauth said. "But they liked their jobs." The Koenigs occasionally had partied but were never boisterous or rowdy, Krauth said another neighbor told him. The Koenigs bought the three-bedroom condo for $60,000 in August 1985 from Hussey, another of those indicted. After selling to the Koenigs Hussey moved to another condominium in central Omaha, according to Douglas County records. The Koenigs still own the condominium, which is rented out, Krauth said. An acquaintance described the Koenigs as "the perfect yuppie couple." They met while students at the University of Nebraska-Lincoln. It was not clear when they married. Koenig enrolled at UNL in September 1977. He was enrolled un the Engineering College until December 1980, when he left without getting a degree. "People who worked with him said he was learning more on his own," Samland said. Jacklyn Bobby enrolled in graduate school at UNL in the spring semester of 1980 and continued her studies through spring 1981. She left without a degree, according to university records. She had received a degree in medical technology in 1977 from Northern State College at Aberdeen, S.D. After Koenig left school, he worked as a computer operator for a Lincoln bank and later was employed by a computer services company in Lincoln before moving to Omaha. Court documents allege he was the key man in the bank fraud scheme. While working for the GTE subsidiary in Los Angeles, Koenig allegedly obtained account numbers and security codes for about 7,700 customers, according to the indictment filed in U.S. District Court in Los Angeles. U.S. Attorney Robert C. Bonner said at a Los Angeles press conference Friday that Mark Koenig also stole an encoder machine from the company and had encoded information on 1,500 counterfeit ATM cards, the {Los Angeles Times} reported. The indictment said that in the scheme, Koenig was to remain in Los Angeles while the others went to other cities to use the cards. The group intended to don disguises to make the withdrawals "because some ATM machines have cameras," said Richard J. Griffin, head of the Secret Service in Los Angeles, the Times reported. The scheme was interrupted two weeks ago by investigators who found them manufacturing the cards at the Koenig's apartment. A sixth person, a friend of Mrs. Koenig's whom investigators have declined to identify, had been asked to participate but instead went to authorities. She agreed to cooperate with Secret Service agents and wore a tape recorder to a meeting at the Koenigs' suburban Los Angeles apartment Jan. 27, according to court documents. Bonner said Koenig's scheme was "extraordinarily sophisticated." He said Koenig was able to transfer the necessary codes onto magnetic tapes, which were affixed to pieces of poster board about as thick as a bank transfer card. According to United Press International, when Secret Service agents, police and sheriff's deputies raided the Koenig's apartment, they found 1,484 completed cards, 6,100 partly finished cards and encoding devices. If the scheme had worked, Bank of America customers probably would not have lost any money because in cases of ATM fraud, bank customarily absorb the losses and reimburse customers. Griffin, of the Secret Service, said the conspirators had targeted only Bank of America accounts in a apparent attempt to make it look like an "inside job," thereby throwing off investigator, the Times reported. >From the October 15, 1989 {Omaha World-Herald} "Nurse Turns Informant To Thwart Bank Fraud" By David Thompson Sally Vilmont's adventure into the world of counterfeiting as a "wired" government informant began with a January telephone call from an acquaintance in Los Angeles who asked Ms. Vilmont if she would like to make $1 million in one weekend. "My first reaction was, `I don't want to go to jail,'" said Ms. Vilmont. But the caller, Jacklyn Bobby, assured her that wouldn't happen because her husband, Mark Koenig, had perfected a scheme to counterfeit and use automatic bank teller cards to raid Bank of America machines. "At first blush, it was astounding," said Ms. Vilmont, a 45-year-old Ralston nurse and administrator of a nursing business who was Nebraska's first entry in the 1979 Mrs. America contest. But instead of taking part in the fraud, Ms. Vilmont - whose father is a retired deputy sheriff - agreed to help Secret Service agents collect incriminating information that helped lead to the capture and convictions of the five participants. She talked with a reporter last week, revealing for the first time her role in unraveling the scheme. She waited to talk until after those charged were sentenced. The scheme was stymied in February, when armed Secret Service agents raided a Los Angeles apartment and found more than 3,500 counterfeit ATM cards being manufactured and 1,400 others already completed. The group planned to fan out along the West Coast during a holiday weekend and use the cards in hundreds of teller machines to collect millions of dollars. Ms. Vilmont said she did not give Jacklyn Bobby an answer before she hung up last January. "You look at your kids, your life, what you would be doing. I just put the whole situation out of my mind." Three days later, Ms. Vilmont received another call from Ms. Bobby, again inviting her to take part in the scheme. Still, she gave no answer. "I hung up the phone and began thinking about it," Ms. Vilmont said. "They just made me an accessory to a felony. I could have tried to talk them out of it, but the way they were talking, I thought there was a 99 percent chance they would go ahead anyway." Ms. Vilmont said she talked to a friend, and he contacted the FBI. The next day, federal agents visited her home. Because it involved use of bank cards, the case was referred to the Secret Service. Ms. Vilmont went to that agency's downtown office and discussed it with investigators. While there, she made several telephone calls to California. "I think they were testing me and trying to get more information, too." she said. Ms. Vilmont made arrangements to go to California, accompanied by a Secret Service agent she called "Joe." To explain his presence, Ms. Vilmont, a divorcee, said she told Ms. Bobby that she had met "a great guy" recently when she went to visit her son, Sean, a sailor stationed in Orlando, Fla. She and the agent flew to Los Angeles late in January. They met for a day with agents and a federal prosecutor in Los Angeles to discuss plans. Then she went to the apartment of Koenig and his wife. Agents had fitted Ms. Vilmont with a battery-powered microphone, which she wore under her blouse. To pick up the conversation, agents placed a receiver and recorder in a van and parked nearby, she said. "I went in and Mark was sitting in a chair at his computer terminal," Ms. Vilmont said. "I asked him what he was doing, and he literally talked right into the microphone. I looked out the window because I expected the sound truck to be rocking." Koenig, 29, explained that he had obtained bank card numbers of Bank of America customers, along with the four-digit security codes. He had stored the numbers in his personal computer, she said. On weekends he sneaked an encoder device out of his employer's office to transfer bank card numbers to magnetic tape. The tape was glued to pieces of white poster board that was cut to the size of bank cards, Ms. Vilmont said. Koenig, described by friends as a computer wizard, worked for Applied Communications Inc. of Omaha. Early in 1988 he was sent on assignment to London for two months and then was transferred to Los Angeles under contract with Bank of America to work on a communications system involving automatic teller machines. Federal prosecutors called him the leader of the counterfeit ring. Other participants were Koenig's 34-year-old wife, Jacklyn; Robert Hussey, 30, a former Air Force captain once stationed at Offutt Air Force Base; Ms. Bobby's sister, Bobbie Jo Bobby, 21; and Koenig's brother, Scott, 26, of Lincoln. Ms. Vilmont said she met Hussey while he was teaching a personal finance course at Bellevue College in 1984, and she met the others in the group through Hussey. Koenig, known as "High Tech" to his friends, told her that the group had already successfully tested the counterfeit. "I asked Mark how many numbers he had, and he said, `7,720,'" Ms. Vilmont said. He told her that on the Presidents Day holiday weekend, Feb 17-20, the group would fan out with the cards, put on disguises and use the cards at as many machines as they could find, withdrawing the limit of $300 each. They planned to drop some cards near the machines, hoping that others would see them, figure that the four digits penciled on each card was the security code, then use them, Ms. Vilmont said. That was intended to confuse and delay investigators, she said. They picked the holiday weekend because banks would be closed, and they thought they could hit more machines and go longer without being discovered, she said. Koenig wanted her to go to St. Louis and use the cards there. "He already had more than 1,000 cards made and cataloged when I got there," she said. Ms. Vilmont said she was put to work cutting the magnetic tape for the cards. During the afternoon, they talked about the scheme. "One thing they hadn't figured out was what to do with all the $20 dollar bills," she said. "I told them it would be best to buy gold bars, and they thought that was a pretty good idea." Later that day, the group decided to test some of the cards they had made. "I told them I would drive," she said. "The agents had rented a car for me, and they told me, `If you go anyplace, take the Cadillac.' "They had put a gadget on it so they could follow me. I drove slow, and I kept looking in the rear view mirror to see that they were following me. I didn't know it then, but there were agents in a car ahead of me and there were others on either side. Mark asked me why I was going so slow - I have a sports car and usually don't drive that way. I told him I was new in California and didn't want to go too fast." They drove until they spotted several bank machines that did not have cameras. "It was a bright, sunny day, and they didn't have their disguises with them," she explained. The counterfeit cards worked, and the group walked away with several hundred dollars, she said. They returned to the Koenig's apartment, and a short time later she excused herself, saying that she had to meet her friend. "The battery pack on the microphone was good for four hours, and I didn't want to stay longer than that. She made plans to return the next weekend, Ms. Vilmont said. "We had a couple scary times on that second trip," she said. "These people were all triathletes (swimming, bicycling and running), and at one point when we were in the apartment, they all starting standing up and stretching. They then started wrestling, and here I am wearing that microphone. I slumped down in my seat and acted like I didn't want any part of what they were doing, and they left me alone." Ms. Vilmont said she learned later that when agents began hearing the scuffling, they got out of their cars and started towards the apartment, thinking she would be discovered as an informant. They pulled back after agents in the van said she was not being harmed. She met with agents later in the day, and it was decided that they would raid the apartment shortly after she returned. They told her they would arrest her with the others, then take the others in separate cars to a federal building for questioning. "There was a security system in the apartment building, and people living there had to press a buzzer so you could get in," she said. "They told me that when I went back, I should leave my purse in the car, then tell them about 10 minutes later that I forgot it. When I went out the door, I was to let the agents in. Then when I came back from the car, they were to arrest me, hustle me up the stairs, rush into the apartment and arrest the others." She said she had been calm during most of the time with the Koenigs and others, but when she returned, she became exceedingly nervous. "My voice started shaking, my knees started shaking. I couldn't think straight. After about three minutes I went into the bathroom and said into my microphone, `I'm losing it.'" She told the others she had left her purse in the car, but when got to the outside door, there were no agents around. "Then all at once there were all these guys running towards me," she said. "They carried shotguns, all kinds of weapons. If the neighbors had looked out their windows, they would have thought it was a terrorist attack. There were 18 altogether." "I went out and got my purse, and when I came back in "Joe" cuffed me, then took me up the stairs to the apartment. The agents went into the apartment and I just shut my eyes. I didn't want to remember it at all." "Then they put me in the car. I just sat and shook like crazy. I rarely lose control - I ran an intensive care unit 13 years - but this time I did." Ms. Vilmont said she was reluctant to go to the federal building, but agents told her she should. "I was still shaking, but I was glad I went, because we sat and talked alot." Kirby Hutchison, agent in charge of the Secret Service office for Nebraska and Iowa headquartered in Omaha, declined comment on the case. In February, after participants in the scheme were arrested, Hutchison told a reporter that "it was a pretty sophisticated operation." He said at the time that the losses could have been "staggering, $14 million or more." The five people involved were sentenced Sept. 29 to prison terms ranging from 18 to 41 months for conspiracy and bank fraud charges. After she returned to Omaha the day after the arrests, Ms. Vilmont called her father in Rockford, Ill., and told him about her experiences. She also told her son, Kevin, a high school junior. Since then, she said, she has experienced many emotions about taking part in the case. "When they asked me to take part in what they were doing, I felt insulted, very insulted, that they thought I would do something like that," she said. There is also a twinge of sadness. "They were all smart, clean-cut, nice people. They didn't party loud, didn't do a lot of drinking. They just got off the track. They got all caught up in condos and cars and clothes and jewelry. They rationalized by saying that they were not stealing from people. They said they were taking from the bank." And, she said, she was not happy about what she had done. "I was mad (at myself)," she said. Then she heard a Creighton University ethics professor tell an audience that, although a person makes the right decision, he or she might not feel good about it. "That was just the right thing for me to hear."