COVER STORY : Crime by the Numbers : As Downey Case Shows, Credit Fraud Is a Pervasive Problem

Each time, the news came as a surprise.

One woman received a note from a department store thanking her for buying $600 worth of cosmetics she knew nothing about. Another discovered $3,200 in charges for jewelry she had never seen. A third learned that someone used an automated teller machine to withdraw $1,000 from her credit account.

Authorities say one person, Debra LaGrone of Downey, carried out each transaction.

According to court documents, LaGrone allegedly stole credit card numbers and other personal information while working at various mortgage companies, then purchased thousands of dollars worth of goods in the names of people she had never met.

When Downey investigators searched LaGrone’s townhouse in January, they found credit cards with other people’s names and account numbers, jewelry that had been fraudulently purchased, and a spiral notebook filled with names, home addresses and credit information of people who had recently refinanced their homes. Authorities identified at least 15 individuals across Southern California as victims, in addition to numerous small merchants, department stores, credit card companies and banks that suffered thousands of dollars in losses.

LaGrone, 39, who has held a variety of jobs in the loan business in the last 20 years, faces 16 felony charges, including commercial burglary and receiving stolen property. She is in jail in lieu of $55,000 bail and awaits a June 9 pretrial hearing in Norwalk Superior Court.

LaGrone has pleaded not guilty and contends that a friend who was recently convicted of a similar crime left the questionable credit cards at LaGrone’s house and gave her some of the merchandise.

Investigators say the case is a brazen example of what they call the crime of the ‘90s--credit card fraud perpetrated by individuals and organized rings who rip off an estimated $1 billion a year in goods and cash nationwide.

Thieves have been known to steal credit information from mailboxes and garbage bins, during home burglaries or after purse-snatchings. But authorities are increasingly concerned about insiders--bank tellers, real estate agents, automobile salespeople, loan processors and others--who have access to confidential information that can open doors to lines of credit and bank accounts.

People with credit cards rarely lose huge sums of money when their cards are used to make unauthorized purchases. Their liability is limited to $50 per card. But it often takes months to purge their credit reports--a process some have called a bureaucratic nightmare. Even worse, some victims say, is the anguish of knowing that someone has tapped into their personal lives and has access to their Social Security numbers, home addresses, dates of birth and other family history.

“I feel violated,� said Orange resident Debbie Gallegos, an alleged victim of LaGrone. “Someone (has) assumed your identity. That’s what is terrifying. You don’t know who’s doing it or why.�

Last year, LaGrone allegedly obtained Gallegos’ credit card account numbers, a secret password on one account and new credit cards. Authorities say that LaGrone made $1,000 in withdrawals on Gallegos’ account at an automated teller machine in Downey and received $2,500 in cash advances that were charged to Gallegos’ account at various Sears stores, court documents show.

Downey investigators suspect that LaGrone gained access to Gallegos’ credit information while working at a Newport Beach mortgage company last summer. Gallegos refinanced her home through the company early last year. When company officials checked recently, they found that information was missing from Gallegos’ file, according to court records.

LaGrone is accused of obtaining confidential information on numerous other people from files at companies in Los Angeles and Orange counties. She allegedly contacted credit card companies, reported cards missing and then requested replacements as well as address changes, according to court records.

Posing as the cardholders, LaGrone allegedly applied for loans and obtained cash advances in other people’s names, made cash withdrawals and ordered merchandise through department stores, jewelry boutiques and clothing catalogues, records show.

*

In one instance, one of the victims had nearly the same name, Dorothy LaGrone. Over a several-month period last year, Debra LaGrone allegedly used Dorothy LaGrone’s name and credit history to obtain a $2,500 loan and purchase thousands of dollars in goods, including $9,300 in jewelry from a Costa Mesa store, court records show.

Even an attorney hired to represent Debra LaGrone early in the case was apparently caught in the web, police say. LaGrone allegedly used someone else’s credit card number to pay $1,000 to attorney John McDonald, court records show.

In all, authorities documented more than $50,000 worth of purchases, many of them allegedly delivered to Debra LaGrone’s Downey residence and to her mother’s former home in Bellflower. Her mother, Kathleen Montgomery, said no goods were delivered to the Bellflower home.

Downey fraud detectives, who spent 2 1/2 months on the case, say the actual amount of purchases and number of victims may never be known. “I think we uncovered the tip of the iceberg,� said Sgt. Greg Griffin, who led the Downey police investigation. “There were so many credit card numbers in (LaGrone’s) day planners that we didn’t have time to check them all.�

Sheriff’s fraud detectives began an investigation last July after a security officer from the Broadway department store in Cerritos complained that someone had made several unauthorized purchases on a customer’s credit card. Downey detectives later began their own investigation after receiving a fraud complaint from a credit card company.

LaGrone was arrested Oct. 4 and released on bail two days later. She was arrested again Jan. 14 after police searched her Downey residence. She told police that the goods found in her house had been given to her or sold to her by a friend who had also worked at some of the same mortgage companies. LaGrone also said that credit cards in other people’s names and account information had been left behind by the friend. LaGrone said the friend was having mail in other people’s names delivered to the Downey address.

Authorities said the friend, who was recently convicted of fraudulently using a bank card in an unrelated case in Orange County, is not a suspect.

*

LaGrone’s attorney, Charles Mullis, scoffed at police contentions that LaGrone masterminded a clever scheme. He said authorities have no proof that LaGrone was the person who purchased fraudulent goods over the phone through companies such as the Home Shopping Network, which sell merchandise on television.

“If Debra LaGrone is such a sophisticated criminal, why was she dumb enough to have all the stuff mailed to her address?� Mullis asked. “Police assume it was Debra LaGrone because the merchandise was shipped to her house, but it’s not an open-shut case.�

LaGrone’s daughter, Sheri, said her mother, a 1972 graduate of Lynwood High School, would not jeopardize a career of more than 20 years in the loan business in which she rose from a secretary to loan processor jobs earning more than $40,000 a year.

Sheri LaGrone, 18, also was arrested but was not charged. She said she frequently turned away goods delivered to the condominium in other people’s names. She insisted, however that her mother, who is divorced, is innocent.

“I know my mom wouldn’t do this,� she said. “I’m watching my mother go through this trouble for something she didn’t do. It seems like the police can send her to jail, innocent or not innocent.�

Police say they have identified Debra LaGrone in surveillance photographs at an automated teller machine in Downey withdrawing funds on the credit account of one of the alleged fraud victims, Debbie Gallegos. LaGrone told police the card belonged to the friend, who had asked LaGrone to withdraw money.

Two eyewitnesses also have identified LaGrone in court as the person who purchased jewelry and applied for a loan using other people’s credit or identification, court records show.

*

In addition, Downey investigators found a credit report in LaGrone’s townhouse belonging to a client of one company where she had worked. LaGrone told police she had taken the file home to work on it, records indicate. Details of the search and the victims’ accounts are documented in a stack of police reports nearly an inch thick.

Consumer advocates say cardholders have good reason to be concerned about whether their credit information is secure. Many companies don’t do an adequate job of screening employees who have access to personal information about customers, critics say.

Two of LaGrone’s previous employers, for example, said they were unaware that she had been convicted in 1988 on charges of check forgery and sentenced to 60 days in jail and three years’ probation. They said they would not have hired her had they known of the conviction.

Critics also say there are so many credit cards in use that offenders can go undetected for months or years.

Credit card companies say they have tightened security during the last decade. They use computers to detect unusual spending activity on clients’ accounts, such as numerous expensive purchases in a short period. Citibank, the nation’s largest issuer of Visa and MasterCard credit cards, contacts customers in such cases to confirm that the charges are authentic, spokeswoman Susan Weeks said.

Some credit card companies place clients’ pictures on cards and use three-dimensional images to make alterations more difficult. But critics say those safeguards have limited value because so many credit purchases are now made over the telephone.

Investigators also say that as the technology to fight the problem improves, so will the crooks’ ingenuity.

*

“If we come up with the most foolproof system to beat credit card fraud, somebody is going to find a way to beat the system,� said Sgt. John Garcia of the Los Angeles County sheriff’s forgery and fraud detail.

Critics say the credit card industry also contributes to the problem by mailing out pre-approved credit applications that can be stolen from mailboxes and garbage bins.

“I still get calls from consumers saying they are getting unsolicited credit cards in the mail,� said Gail Hillebrand, an attorney with the nonprofit Consumers Union, publisher of Consumer Reports magazine. “It’s a continuing complaint.�

Victims such as Debbie Gallegos and Dorothy LaGrone, meanwhile, are stuck trying to clear up their credit problems and say it will take years for the psychological wounds to heal.

Dorothy LaGrone has canceled several of her cards and said she doubts whether she will order new ones. Gallegos has spent months notifying credit card companies of fraudulent charges on her credit accounts, placing a hold on eight of her cards at one point to guard against fraudulent spending sprees. She says she is more cautious than ever about giving out personal information.

“When people ask for my Social Security number now, it sends shivers down my spine,� Gallegos said. “I really think twice about how it can be passed along down the road.�

Protecting Against Credit Card Fraud

* Never give out your credit card number over the phone unless you are calling a company you know to be reputable.

* Do not write your card number on postcards or envelopes as part of a deal to get prizes or gifts.

* Keep copies of your receipts when making a purchase.

* Shred receipts before throwing them away.

* Destroy old credit cards once they have expired, preferably by cutting them in half. Make sure the card number is illegible.

* Do not leave your credit card in hotel rooms or exposed on restaurant tables for long periods. The account number can be copied.

* Notify your credit card company if you don’t receive your billing statement on time. Open statements promptly and make sure all the charges are yours. Immediately report any unauthorized charges.

Sources: Citibank; Los Angeles County Department of Consumer Affairs