Criminal Charges, Volume XXXIII: Tech scammers steal iPods, cell phone service

Hundreds of thousands of dollars in free iPods and cell phone service.

While that may sound like a consumer's dream, those MP3 players and mobile phone minutes could come at a hefty price for the two alleged technology scammers featured in this week's look at payment card fraud. The men spotlighted in Criminal Charges stand accused of schemes that may land them in behind bars, where their cell mates are unlikely to resemble the Mac guy. 

Michigan man's alleged iScam defrauded Apple 
A Michigan man who fixed Apple iPods could soon be learning a new skill: making license plates.

Nicholas Woodhams, who worked as an independent iPod repairman out of the Kalamazoo, Mich., area, stands accused of using valid serial numbers to request over 9,000 iPod Shuffles from Apple's Web site, with court documents indicating he then re-sold thousands of the MP3 music players for $49 each.

Woodhams -- whose lawyer describes him as "computer-savvy" and "very bright" -- allegedly never even had those iPods in the first place. "Through his repair business, Woodhams knew that iPod owners could get a replacement if their Shuffle had problems, according to the government," the Associated Press reports. The assistant U.S. attorney wrote that via trial and error, Woodhams found he could guess valid, warrantied iPod serial numbers, which he then entered on the Apple Web site for replacements for iPods he never purchased. He also told his employees to enter serial numbers and then have the MP3 players sent to a United Parcel Service store or to local addresses.

While Apple had a system in place to prevent the free shipment of replacement iPods, repairman Woodhams found a fix for that problem. "If Apple didn't receive a defective iPod in return, the company would charge the cost of a replacement to a credit card provided by the customer," the AP reports. "But Woodhams used credit or debit cards that rejected the transaction, the prosecutor said."

Prosecutors have slapped Woodhams with fraud and money laundering charges. The government hopes to seize from the following from Woodhams: real estate, Apple computers, two vehicles, a motorcycle and more than $571,000 -- all alleged to have been earned through his crimes.   

Fraudster charges cell phone bills to mobile phone store's debit card
While he temporarily enjoyed thousands of dollars in free cell phone service at a mobile phone store's expense, a Wisconsin man could soon pay the price.

That's because Derrick L. Austin stands accused of illegally charging nearly a year's worth of cell phone service to Cell Phones Plus in Bloomer, Wis. According to a criminal complaint, he visited the business in July 2007 in order to make good on a $467.77 cell phone bill and avoid having his service disconnected. Based on standard procedure in such cases, Cell Phones Plus used its debit card to make a one-time direct payment to provider Alltel to prevent Austin's service from being cut off.

"After a credit or debit card is entered into an account, as it was when the company paid Austin's bill, a person has the opportunity to use the card again through an automated phone system," the Leader-Telegram reports.  

That's how Austin apparently worked the payment system to his advantage. "After that, when the man called Alltel to make a payment, he would be asked if he wanted to put the charge on the last credit card he used, which was the Cell Phones Plus debit card," the Chippewa Herald Online reports. "He did so on a number of occasions in the following months, though sometimes he made the payment with his own money."

The scheme ended after the cell phone payments were traced to Austin. In the time period from Nov. 25, 2007, to Oct. 24, 2008, he allegedly rang up $3,632.96 in fraudulent charges.

He is due in court on April 21 and could face a $70,000 fine and more than 10 years in prison.  

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