Saturday, August 11, 2012

Brothers Who Defrauded Nordstrom with Online Reward Scheme Sentenced to Two Years in Prison for Wire Fraud

Two brothers were sentenced in U.S. District Court in Seattle to two years in prison for wire fraud in connection with their scheme to defraud Nordstrom of more than $1.4 million in commissions and rebates, announced U.S. Attorney Jenny A. Durkan. ANDREW S. CHIU, 29, of Anaheim, California, and ALLEN J. CHIU, 37, of Dallas, Texas, pleaded guilty in April 2012. The brothers devised a scheme to defraud Nordstrom after they had already been barred for purchasing any goods from the website. Because Nordstrom quickly notified law enforcement, the U.S. Attorney’s Office was able to seize more than $970,000 in illegally derived assets which will be applied toward the restitution owed to Nordstrom. U.S. District Judge Ricardo S. Martinez imposed the sentence.
According to records filed in the case, in 2008 the CHIU brothers were barred from ordering merchandise from because of excessive claims for refunds based on representations that merchandise had never been delivered. However, both brothers continued to try to place orders with Both men belonged to FatWallet, Inc., a membership-based shopping community website that promotes various online retailers by providing coupons and cash back incentives for purchases. FatWallet paid cash back rewards to the CHIU brothers for purchases made at various online retailers, including In January 2010, the brothers discovered they could exploit a computer programming error in Nordstrom’s ordering system by placing orders that would ultimately be blocked by Nordstrom. No merchandise would ship and nothing would be charged to their credit card. However, Nordstrom would unknowingly continue to compensate FatWallet for the order, and the brothers would still receive the cash back credit from FatWallet. Between January 2010 and continuing through October 2011, the CHIU brothers collectively placed more than $23 million in fraudulent orders through The fraudulent ordering resulted in Nordstrom paying $1.4 million in rebates and commissions, with more than $650,000 in fraudulent cash back payments going directly to the brothers. The error that permitted the continued payment of rebates in the ordering system has since been fixed.
In asking for the two-year prison term, prosecutors wrote to the court, “The actions of the Chiu brothers are equivalent to someone discovering that a back door to a Nordstrom store had been accidentally left open, and then walking in through that door to steal $1.4 million from the till... This was not a quick and hasty crime, done with any agonizing guilty conscience. The Chius methodically submitted orders, day after day, for nearly two years until they had ordered an eye-popping $24 million worth of merchandise. In order to try and avoid detection and suspicion, they had to constantly create new user names at FatWallet, and make sure not to order too much merchandise at once on any one user name. This was a crime committed in a calculating, careful manner over a long period of time.”
The case was investigated by the FBI. The case was prosecuted by Assistant United States Attorneys Katheryn Kim Frierson and Francis Franze-Nakamura.

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