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Check fraud schemes burn banks

Workshop will focus on ways to trim problem

The Associated Press

PORTLAND -- Rickie Darnel Sykes and Shakur Shabazz weren't the brightest of crooks.

Their scheme to defraud Northwest banks crumbled when most of the nearly two dozen people they recruited to pass fake checks quickly rolled over when confronted by the FBI.

Even so, the two Portlanders led a ring that passed fraudulent checks totaling more than $570,000. Banks in Portland and Seattle lost more than $339,000.

That's only a small portion of what Northwest banks are losing to check fraud, which the FBI calls the banking industry's No. — crime problem.

Bankers from Oregon, Washington and Idaho are meeting today in Portland to discuss fraud as part of a three-day workshop presented by the Tri-State Bankers Association. Experts will discuss check crimes, new account fraud, internal theft and ways the banking industry can protect itself and its customers.

Oregon banks attributed $1.5 million in losses to fraud this year through April and more than $5 million for last year, said special Agent Mike Ruffner of the FBI's Portland office.

Nationwide, fraud attempts at banks exceed $1 billion a year and about half is recovered, according to a survey by the American Bankers Association. Some say it's even more.

Color copiers, high-resolution printers and the boom in personal computers have made it easier for fraud artists to scam banks.

In another Portland case moving through federal court, counterfeiters were able to steal more than $1 million from a single bank by passing fraudulent payroll checks made on a home computer.

It doesn't take a lot of money to put together the technology on one's desktop that can print these official-looking documents,'' said Tom Perrick, president of the Oregon Bankers Association in Salem.

Technology drives a lot of wonderful things, but it unfortunately can cause a lot of problems with regard to fraud.

Sykes and Shabazz used computer-generated checks drawn on actual accounts of Northwest businesses, such as Pendleton Woolen Mills.

They stole the account information, then recruited people to deposit fake checks into their personal accounts and withdraw some or most of the money before the check cleared.

Those people took a small share of the profits. But when questioned, they told investigators the checks were part of a loan program from a company called Corporate America. They claimed they had been scammed.

A lot of the checks the pair made looked pretty good, said Allan Garten, the assistant U.S. attorney who prosecuted Sykes, Shabazz and 15 others on various charges of bank fraud, conspiracy and possession of counterfeit securities.

Sykes was sentenced to five years in prison; Shabazz was sentenced to eight years and three months. Both were ordered to pay about $80,000 in restitution.

Banks are responding to the problems through training, internal security and new technologies.

Critics say banks have failed to institute the most aggressive fraud safeguards -- such as holding checks until they clear -- because they don't want to inconvenience customers.

But Dan Klein, director of security products for Clarke American Checks Inc., the nation's third-largest check manufacturer, said banks for the most part have been doing a good job.

It's a tough battle because you want to serve your customers, he said. You want to move the lines quickly but you also want to protect the financial institution itself.