U.S. citizen charged in Nigerian tax fraud case
A Wisconsin man is set to appear in federal court in Medford today on accusations he was responsible for six figures worth of harm in a tax-fraud scheme that so far has involved $11 million in losses by a ring of Nigerian nationals using information stolen from an Oregon business.
Curtis S. Pethley, 61, of Madison, Wisconsin, will make his initial appearance in U.S. District Court on felony mail fraud, aggravated identity theft and conspiracy charges alleging he purchased at least 156 prepaid debit cards in 2013 and 2014 to funnel money from fraudulently filed tax returns using information taken largely from Oregonians, according to court documents filed by the U.S. Attorneys Office in Pethley's case. His role amounted to $897,442 in refunds that totaled $643,431 in actual losses.
Pethley is the first U.S. citizen charged in the massive tax-fraud scheme involving nine federal agencies around the country. Four Nigerians have been sentenced to prison, and ringleader Emmanuel Oluwatosin Kazeem, convicted last summer following a weeks-long trial, remains in Jackson County Jail awaiting sentencing in May.
Among the victims Pethley is believed to have defrauded was a Medford married couple who sparked the investigation, according to a document filed in January in Pethley's case. The husband and wife reported to the IRS in May 2013 that someone had fraudulently filed tax returns using their personal information. The couple's federal return filed April 1, 2013, used their Social Security numbers, birth dates and a former mailing address of theirs.
The fraudulent return had requested that a $6,567 federal refund be deposited into an account associated with a prepaid debit card bought at a CVS Pharmacy in the Chicago suburb of South Barrington, Illinois, which had been registered in the victim's name, court documents say. A fraudulent state return filed that same month routed the refund to a Texas bank account.
Investigators determined that Pethley, who lived in Schaumburg, Illinois, at the time, bought the prepaid debit card involved in the Medford couple's case, among other cards, leading to a search warrant served May 14, 2014. At his residence, investigators found roughly 150 prepaid debit cards and gift cards, along with cards personalized with victims' names to be sent to a Michigan address along with numerous money orders amounting to about $50,000. Pethley is also believed to have mailed $69,000 worth of money orders to an address in California, the documents allege.
Pethley allegedly told investigators that he'd been making purchases on behalf of a contact from Nigeria who he knew only as "queen_jennn" and had first met through a dating site in 2011. Through email and instant messaging accounts, queen_jennn would instruct Pethley to purchase prepaid cards and provide account numbers. Others involved in the scheme would register the cards online and arrange for the fraudulent refunds to be deposited into them, but Pethley would hold onto the cards, prosecutors allege. They say Pethley took cuts from the ill-gotten funds ranging from 10 to 20 percent.
At least some of the personal information used to file the estimated 10,000 fraudulent tax returns in the ring came from a database of 91,000 taxpayer IDs stolen from Lincoln City-based CICS Employment Services, according to earlier news reports, which investigators said Emmanuel Kazeem bought from a hacker in Vietnam.
Although Pethley is the first American charged in the scheme, court documents indicate other U.S. citizens were recruited.
"Some conspirators, including queen_jennn, recruited U.S. persons like Pethley to help them acquire the numerous prepaid debit cards needed to complete the scheme to defraud," court documents say, adding, "These recruits were also directed as to how much money was to be wired overseas to Nigeria, which names to be used as sender and receiver, and how to avoid having to provide identification to the wire services like Western Union."
Pethley separately has pending child pornography charges filed last November in U.S. District Court in Madison, Wisconsin, alleging he distributed an explicit image of a minor via Facebook messenger and possessed at least one image of a prepubescent minor on a hard drive, according to court documents filed in the case.
Two of six suspects are in jail awaiting sentencing while four others in the identity theft ring have been sentenced to prison.
Kazeem remains lodged in the Jackson County Jail awaiting a sentencing hearing set for May 17.
— Reach reporter Nick Morgan at 541-776-4471 or email@example.com. Follow him on Twitter at @MTCrimeBeat.