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October 18, 2010
By Betty Carter, Poolandspa.com News
From Poolandspa.com Newsletter October 2010
Las Vegas, NV USA


Poolandspa.com, an online retailer of pool & spa supplies, was recently a victim of an international credit card theft scam.

Janice Beckman, Bookkeeper for Poolandspa.com reports that "In early June, we started receiving telephone orders from a "seemingly nice" gentleman from Florida who needed to purchase a number of fairly expensive pool products for his yacht and vacation house in South America. This gentleman was so nice, and purchased a number of items, all over the phone throughout June and July of 2010."

Ethan Johnson, head of Poolandspa.com's IT Dept. and also in charge of online fraud investigations noticed nothing out of the ordinary.  "We have seen attempts at Internet fraud before, over the last 18 years selling online, but normally these unlawful attempts are committed through online orders or emails.  We have never seen a situation where a customer has actually called our call center, over a period of months, and placed very specific phone orders for pool or spa products."


Tim Casey, Online Product manager for Poolandspa.com says that "We frequently get emails from foreign customers attempting to order, like 50 Hayward Super Pumps all at once, and that certainly sets off all our bells and whistles regarding potential internet fraud." 

"In this instance, since the thief (customer ???) called in his orders, and actually signed for the delivery of his products, we did not think that this was out of the ordinary."

Call Center Manager Liz Gonzales actually thought she had befriended this customer. "He was so nice, and the things that he ordered made sense, so when purchased together, none of us ever suspected anything illegal was going on."



Towards the beginning of September, right after Labor Day, the credit card charge backs and customer complaints started rolling in.

"It was crazy here for a couple of days right when we got back from the Labor Day Holiday Weekend" reports Janice Beckman from Poolandspa.com's Accounting Dept.

"We were getting phone calls, faxes and online complaints from customers that we had no record of."  She continues that "People were calling about unauthorized charges to their credit cards from a company called "Poolandspa.com" and they did not even have a pool nor a spa."

Jeff Baxter, General Manager of Poolandspa.com's E-commerce division called a meeting during the second week of September to do a "fact-finding" investigation as to who these customers were, what did they (he) purchase, and from whom.....and using what credit cards.

"I have been involved in various online businesses for over 15 years and I have never seen anything like this', he said.


Once it was determined that this seemed to be a fraud, totaling almost $10,000, spanning a period of two months and consisting of 8 different orders, a frightening picture started to emerge.

"Believe it or not, this guy had scammed four different CSA's (Customer Service Agents), three delivery companies, two freight forwarders and four different credit card companies over a period of eight weeks" Jeff reports.

"Not only that, but after a few days on the phone, it turns out that this was only a tiny part of a huge International credit card theft ring that was operating primarily out of New York and Miami", Mr. Baxter said.

Jeff continues that "Although we followed all the appropriate procedures, including getting the proper credit card authorizations, and UPS or Fedex delivery receipts for each and every order we shipped, none of the major credit card companies were able to help us out.  They just took the money right out of our bank account and basically said that we were "screwed", to quote one of the credit card company fraud investigators."



Janice Beckman, the company's Bookkeeper, has run into similar problems working with other online companies.  She took over the fraud case and spoke to the fraud investigators at American Express, Discover, Visa & Mastercard, as well as our Merchant Processor Global Processing and our business bank Chase. 

Although they were all sympathetic, they all admitted that they could do nothing about this, and that we should contact a federal agency or local law enforcement.  At the time we accepted the credit card charges - and at the time they were approved - the unknowing cardholders had not reported their credit card numbers stolen yet. So therefore the cardholders were not liable, the credit card companies were not liable, and the delivery agents (UPS & FEDEX) were not liable either.


So after having almost $10,000 automatically removed from their bank account - as well as over $8000 already paid to the product suppliers, Poolandspa.com had to send one of its' Officers to the local police (Las Vegas Metro), the local Secret Service Office and the local FBI Office. All of which took the reports - however insisted that "it was out of their jurisdiction" for some reason or another.

Mrs. Beckman recalls, "This was unbelievable....this was a clear-cut crime.  We had the thief's name, phone number, delivery address, delivery signature for each and every order, emails, recorded phone calls from the call center...everything.  "Colombo on a binder" could have solved this crime." she said.  But nothing was done.

Jeff says that "It seems that everyone involved wanted to blame this on everyone else.  All the credit card companies and all the law enforcement agencies had some different story - some reason why "they" could not be the people to investigate this crime.  Why do we pay Merchant Fees?  Why do we pay Federal or local taxes for police? This is not something that any of us could believe.  Sure we believe this type of fraud is possible, but it is almost more of a crime that there was no one who would even bother to investigate this for us" he exclaims.



Fraud Investigator Ethan Johnson goes on to say that "Although we were taken for a large amount of money in this scam, at least we thought we has insurance to cover it.  At least that's what the law enforcement agencies kept telling us."  However it turns out that nothing could be further from the truth.

Upon further investigation, and numerous days and hours of calls with the "Internet Fraud Insurance Company" whose policy was touted to us as "the best thing since sliced bread"......turns out that the insurance policy did not cover "victims of a scam".  "What?", says Mr. Baxter.  "How can you sell an Internet Fraud Policy and specifically exclude "victims of a scam" to an Internet Company?  Is this some legal jargon?  Is this also some Insurance Fraud as well?  Oh my god.  What the heck do we pay all these people for anyway?" he exclaimed.


The "Bottom Line" in this case was that Poolandspa.com was out the $10,000 in credit card charges.  Poolandspa.com was out over $8000 paid to the drop-shippers and suppliers of the products.  Poolandspa.com was out the $3000 it paid for the special "Internet Fraud Protection" insurance (which they later cancelled) and Poolandspa.com was out all the merchant fees, chargeback fees and legal fees that these transactions incurred.

The moral of the story?  As Dan Harrison, Poolandspa.com's founder says, "You know, you win some and you lose some.  You can have every safeguard in place throughout your ordering system and supply chain, but there is always some thieving hacker somewhere, that is trying to figure out ways to get around such procedures, 24/7.  We still don't know if this is connected, but the week after we were informed of this situation, we read in the newspaper that  "The key people involved in a huge international credit card fraud cartel were arrested in New York for stealing and using hundreds of thousands of stolen credit card numbers to purchase items over the internet."

Were these the same people that scammed Poolandspa.com?  We will probably never know.  But at least some of these thieves were, in fact, captured.  And maybe, just maybe, this will help some other unsuspecting, respectable pool & spa Internet Merchants from being ripped off by these international hackers and thieves in the future.

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