iPod replacement scam and mobile airtime payment fraud

The fraud is something natural to earn money in our modern life. Starting with huge investment scams and ending with individual petty larceny fraud became ineradicable phenomenon. While the SEC and IRS like agencies are investigating into Madoff and similar cases the police in Michigan and Wisconsin solved two small crimes related to misuse of additional services provided by companies.

A Michigan man Nicholas Woodhams who fixed Apple iPods was charged of fraud and money laundering after he used valid serial numbers to request over 9,000 iPod Shuffles from Apple's Web site. The court documents report that then he re-sold thousands of the MP3 music players for $49 each. Woodhams knew that that ‘Woodhams’. After a number of trials he found that he could guess valid, warrantied iPod serial numbers, which he then entered on the Apple Web site for replacements for iPods he never purchased.

Interestingly, Woodhams was clever enough to fix another problem related to shipment of new replacement iPods. Apple uses a system that prevents such free shipment. If it does not receive a defective iPod in return, the company would charge the cost of a replacement to a credit card provided by the customer. Woodhams ‘used credit or debit cards that rejected the transaction’.

Authorities will likely seize Woodhams’ assets which include real estate, Apple computers, two vehicles, a motorcycle and more than $571,000 -- all alleged to have been earned through his crimes.

In Wisconsin Derrick L. Austin was using mobile phone store's debit card to charge his cell phone bills to it. Austin temporarily enjoyed thousands of dollars in free cell phone service at a mobile phone store's expense. The criminal filing states that the man visited Cell Phones Plus in Bloomer in July 2007. He wanted to pay off a $467.77 cell phone bill and avoid having his service disconnected. As it was prescribed by the standard procedure 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.

A vulnerable feature of such payments that can be abused by violators is that a card once entered into an account can be used again through an automated phone system without the necessity to enter card data again. This way Austin tuned the service to his advantage. Thus when he 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. He did so in the time period from Nov. 25, 2007, to Oct. 24, 2008, and he allegedly rang up $3,632.96 in fraudulent charges.

The court hearing is scheduled for April 21. Austin could face a $70,000 fine and more than 10 years in prison.