By Erin Sherbert
By Howard Cole
By Erin Sherbert
By Erin Sherbert
By Leif Haven
By Erin Sherbert
By Chris Roberts
By Kate Conger
Russian immigrants Igor Kogan and Mikhail Moiseev were in the same business, both dealing in high-end merchandise. Both lived in San Francisco, but preferred to commute outside the city to work, as did many of their associates. In fact, the two men were nearly related, in that Moiseev's wife is the sister of Kogan's longtime girlfriend, Diana Ilyagueva. And for a time, business in the Bay Area's wealthy hills was good for both of them.
Kogan, for instance, might be seen leading a team of associates who would drive up and down the semirural, tree-lined roads that wind around Mill Valley, along Highway 1, above Stinson Beach. There, where mailboxes stand in clusters of five or even 10 along the road, away from expensive homes nestled in the woods, he and his colleagues would go to work, looking for credit cards to lift. With a partner on the lookout, a good businessman could be expected to rifle a cluster of 10 mailboxes in five minutes.
Once a bounty of credit cards had been gathered, the cards would be activated through an interesting, yet stunningly simple, process involving two short phone calls. Someone like Kogan or Ilyagueva would then recruit a shopper, say a young Russian who spoke decent English and had a knack for refusing to take no for an answer. The shopper would go to Macy's, Nordstrom, CompUSA, or some other store, and, under the watchful eye of the recruiter, buy computer equipment or jewelry or some other high-value merchandise. The goods would be slipped to a fence, or, in many cases, returned to the store for cash or for credit -- to the account of the thief's own credit card!
Amusingly, shoppers have told federal agents that this return-of-goods scheme works much better on the West Coast than in New York, where store clerks are unlikely to be concerned about offending customers trying to get refunds.
Although federal agents say they found videotapes of mob movies and Sopranos episodes in apartments they searched during their investigations, the Russian credit card thieves who hit the Bay Area in the late 1990s did not constitute a classic, Mafia-style criminal organization. These thieves seemed to operate within a loose network of "cells" that simply did business with one another, rather than reporting (and passing a cut from each illegal transaction) up the line to a crime boss.
This decentralized organization made the Russian credit card game a tough, time-consuming criminal enterprise to penetrate or prosecute. But it's a game that's increasingly widely played. The Federal Trade Commission recently reported that identity theft complaints doubled in 2002, rising to about 162,000 from 86,000 the year before. It is, according to the commission, the single fastest-growing crime in the United States. And, federal agents note, the stealing of mail is a first step in most identity thefts.
Although no one knows more ways to steal mail than the United States Postal Inspection Service, it took postal inspectors four years, hundreds of hours of wiretaps, and months of surveillance and interviews with petty thieves to crack the Bay Area Russian credit card case. And even then, more than a little luck was involved.
By 1997, reports of stolen mail -- and stolen credit cards in particular -- were pouring into the San Francisco postal inspection office from investigators working for banks and from department store security officers. Eventually, local police and sheriff's departments also began reporting increases in mail theft and the use of stolen credit cards to buy expensive goods in San Francisco. This particular brand of mail stealing didn't seem to fit a pattern familiar to postal inspectors, who handle law enforcement matters for the Postal Service.
But there was some sort of pattern to it.
A veteran postal inspector whose career history includes several years in U.S. Naval Intelligence, Robert Dortch looks, talks, and acts so much the cop that it's genuinely hard to imagine him doing anything other than law enforcement. His office is strewn with commendations, piles of case evidence, and maps with pins in them denoting the geography and connections of crimes.
A man of few unnecessary words, Dortch is wont to refer to hardened criminals as "those knuckleheads" and to produce the sort of detailed reports that leave little room for argument. Identity theft, which includes stealing credit cards in the mail, is a Dortch specialty; he even teaches other law enforcement agencies about it. And over the last four years, he's become an expert on a Russian brand of the crime.
Russian criminals, according to the cops who track them, tend to distinguish themselves from other felons by being, generally, very methodical, enterprising, and industrious in their work. They are not involved in criminal enterprise as an adventurous hobby, or as a source of quick drug money. Instead, for the Russians, theft is about finding loopholes, earning a living, doing business in a less-than-legitimate way. And, for more than four years, it was big business for one particular criminal enterprise run by Russian immigrants in San Francisco.
Last month, three of the main players in that network of credit card thieves -- Kogan, Ilyagueva, and one Inna Zeldovich, who helped facilitate purchases with stolen cards for the group -- pleaded guilty to various felonies in a San Francisco federal court. Through their attorneys, all three declined to be interviewed for this story. Moiseev, who is awaiting trial, was unavailable for comment. At least three others connected to the same theft network already have been sentenced to San Mateo County Jail and state prison. In total, investigators estimate that what they believe to be a network of thieves stole, and used, more than 800 credit cards belonging to Bay Area residents, netting somewhere around $1 million a year.
By 1998, when Dortch and his crew started their investigation, stolen credit card reports were continuing to mount in San Francisco, as were small busts for theft that are usually pleaded down to probation sentences without much jail time.
Mail was not disappearing from collection boxes in the usual mad grab by speed freaks looking for checks and personal identification information. Only credit cards were being taken, and the stolen cards were being authorized for use by the banks that issued them, even though the owners of the cards should have been the only people able to make them work.
Most of the stolen cards came from wealthy, rural neighborhoods in the Bay Area, including Mill Valley and Los Altos Hills. They were used to buy electronics, designer clothing, and jewelry from a handful of department and computer stores. And all of the people caught with stolen credit cards were Russian immigrants who lived in San Francisco or San Mateo counties.
And the identity thieves were bragging about their ability to elude serious capture. Some even claimed to have been in Russian prisons that made the Bay Area's county jails seem like country clubs. They were willing to risk the occasional felony.
Others were simply persistent.
For months through the end of 1997 and into early 1998, residents of Los Altos Hills and Woodside reported seeing strangers cruising the area. One afternoon, Patricia Hamann saw an unfamiliar man standing at the cluster of mailboxes near her Woodside home. He appeared to be looking through the mail; she asked him what he was doing. The stranger -- Robert Nikolayev -- replied in broken English that his boss had assigned him to pass out supermarket fliers and held up a pile of newspaper advertising inserts as proof of his mission. After a brief conversation, he got into a nearby car, where a woman was waiting for him, and drove down the road to another cluster of mailboxes. A week or so later, Hamann saw Nikolayev again at the mailboxes. Though Hamann hadn't noticed anything missing from her mail, the scene seemed suspicious. She phoned police.
In January 1998, San Mateo sheriff's deputies staking out the neighborhood saw a Toyota pull up in front of a small row of mailboxes; one of its occupants quickly handled some mail from the boxes and then drove away. The deputies stopped the car and found Nikolayev, Kogan, and a woman inside.
A week later, deputies showed up at Nikolayev's apartment on Vicente Street in San Francisco's Sunset District. When no one answered the door, the cops kicked it in as Nikolayev was coming out of the kitchen. A neighbor found two stolen credit cards on the ground underneath Nikolayev's kitchen window. Nikolayev was arrested on charges of receiving stolen property and released on bail.
The next month, Nikolayev and two accomplices went shopping for computer equipment with stolen credit cards. Court documents say the three talked about laptop computers for a while and eventually decided to purchase one. One of Nikolayev's accomplices handed the store clerk a credit card; the other stood near the door of the store, talking on a cell phone.
A customer who was in line remembered the clerk having problems getting the credit card to work and asking for identification. The accomplice said that his wife had taken his wallet, including his identification, to shop at a new Target store down the street. This scenario didn't seem to make sense; the Target had not yet opened for business.
Nikolayev, meanwhile, was walking back and forth between the checkout counter and the woman on the cell phone. The witness behind them also heard Nikolayev tell the accomplice that he had other credit cards if this one wasn't working, but the accomplice was adamant that this credit transaction should work. (A suspicious credit card agent on the other end of the call for authorization had apparently asked the store clerk to stall after noticing that the same man had purchased computer equipment from another store only hours before.)
Nikolayev and the woman on the cell phone left the store. Shortly afterward, with his credit card rejected, the shopper fled the store, getting into a rented silver van with Nikolayev waiting behind the wheel. San Mateo police stopped the van a short distance away on Highway 92, finding computer equipment purchased with a stolen credit card earlier in the day inside.
Still, this was not the end of Nikolayev's crime career.
A few months later, after Nikolayev had again been released on bail, he was charged with stealing mail in Marin County with another accomplice. And then a Redwood City neighbor identified Nikolayev as the man he saw rifling through mail near his home, along with a woman he identified as Diana Ilyagueva.
Finally, in February 1999, Robert Nikolayev was found guilty of felony charges of burglary and receiving stolen property; he was sentenced to nine months in jail and three years' probation.
Meanwhile, postal inspectors began to watch other Russian suspects around the Bay Area.
Once in possession of a couple of pieces of personal information -- a Social Security number and birth date, for example -- a thief can drain bank accounts, run up credit card balances, and wreak the kind of general financial havoc that can take years to correct.
In the Bay Area Russian credit theft network, federal agents saw that an organized thief could steal a credit card from the mail in the morning, pay another criminal for the identification information necessary to make the card work, use the card to shop for high-end merchandise, sell the merchandise to another criminal, and return home with nothing but cash -- before the end of the same day.
In an attempt to get some kind of handle on the rise in Bay Area credit theft, Dortch and his colleagues requested that local police notify them whenever someone was found using stolen credit cards or stealing mail. At the same time, the feds began the tedious task of interviewing petty thieves in counties all over the region. The Russian mail thieves remained a formidable network to crack. In 1998, though, shortly before Robert Nikolayev was sent to prison, Dortch got a break that would prove key to unlocking many of the mysteries of the theft network in San Francisco.
A confidential informant working undercover for the Postal Service managed to get himself recruited by Igor Kogan. It wasn't exactly a smooth beginning; in early meetings, the informant wore a recording device, but most of the conversations captured were in Russian. So the inspectors had to wait not only for the informant to turn in audiotapes, but also for the tapes to be translated. In the meantime, no one but the criminals and the informant knew what was going on.
Eventually, though, agents from the Postal Service, the FBI, and state and local law enforcement agencies formed a task force that included people fluent in Russian. Also, the informant began wearing a type of "wire" that transmitted a radio signal; at last, agents could listen in while they followed the criminals around.
This new access gave the agents fresh insight into the way the Russians harvested credit cards. Cells of two to five thieves would hit a neighborhood; one or two would stand watch while the rest rifled the mail, feeling envelopes for credit cards. After a thief found an envelope containing a credit card, he'd open it, removing the card and the mailer that the card arrives in from the bank; that mailer contains the name, address, and account number of the recipient. The thieves often wrapped the mailer around the card and put both inside an empty cigarette box for camouflaged safekeeping. Some of the recruited thieves were paid a set amount for each card stolen; others, like Kogan, worked for themselves.
The success of the Russian network depended on a couple of gifts from corporate America. The Russians knew that banks and credit card companies mailed replacement cards to good customers before their old cards expired, and that the companies also sent cards unsolicited to addresses in wealthy ZIP codes, hoping to entice potential new, and desirable, customers.
Because other mail would be left undisturbed, and the credit card mailings were not necessarily expected, most of the cards could be stolen, used, and discarded without the owners knowing the cards were missing -- until a bill showed up a month later.
Over time, federal investigators followed the thieves as they took recruits "shopping" with stolen credit cards -- at Macy's, Nordstrom, and computer stores -- and then lurked somewhere close enough to watch the purchases, just in case things went wrong. If a shopper were arrested, bail could be arranged quickly, limiting the chance that he or she might talk to authorities. Shoppers typically got a negotiated cut -- say, 15 percent -- of what they bought, depending on their performance and the degree of difficulty involved in the transaction.
And finally, the feds were able to watch targets dispose of the stolen goods, handing over a computer in a parking lot, giving merchandise to a known fence, selling it to someone looking to buy something cheap, or returning it for credit to the account of a non-stolen card.
Mikhail Moiseev was arrested in 1996 after he attempted to return merchandise at a Macy's store in Corte Madera. The sales clerk became suspicious when the credit card that Moiseev gave her for the return (his own) didn't match the account number on the receipt from the original purchase, which had been made with a stolen credit card. Police arrested him with a shopper in the parking lot, eventually connecting him to several credit card thefts and a round robin of purchases and returns.
The case was delayed, however, when Moiseev was picked up by the Immigration and Naturalization Service and detained for several months. The agency was unable to confirm the details of Moiseev's case. Following a hearing on the matter, though, Moiseev avoided deportation and resumed his role as defendant in Marin County. In April 1997, he pleaded no contest to felony charges of burglary and receiving stolen property and was paroled after serving nine months in jail.
Court records show, however, that after completing probation in June 2000, Moiseev successfully petitioned the court to reduce his crimes to misdemeanors, which may prove to have been a particularly prudent legal move. Federal law mandates that a hearing be held to determine whether noncitizens may remain in the country after a felony conviction. Prior felony convictions could hurt the chances for Moiseev to stay in the country, since he is not a U.S. citizen.
In 1999, after federal agents began watching the day-to-day operation of the Russian identity theft network in San Francisco, a satellite theft operation caught their attention, one that they'd heard referenced on tape.
Dortch received word that a Russian couple had been using stolen credit cards at a Smart & Final store on Seventh Avenue. The woman got away, but her husband was caught by police, who notified the feds. The postal inspector thought he recognized the 58-year-old man from a taped conversation among Igor Kogan and his associates. This man, Dortch figured, was the one they called dedko (Russian for grandfather), someone who drove a white Jeep and, supposedly, was involved in credit card theft in north Marin and Sonoma counties.
More investigation led to the Quality Market on Irving Street near 15th Avenue, a part of San Francisco's Sunset District where Russian and Chinese immigrant communities overlap. As it turned out, Boris and Betya Kogan (no relation to Igor Kogan), who operated the market, were attempting to use stolen credit cards to buy cigarettes and other supplies from Smart & Final (along with furnishing their own household). The cards belonged to residents of Glen Ellen and Santa Rosa.
On March 17, 1999, a contingent of federal and local investigators split up, one team heading for the market and another for the Kogans' Richmond District home on Geary Boulevard. But Boris Kogan left the house before the cops were ready to enter, so they followed his car as he picked up a shopper and then drove to a Beverages and More store in Colma, where he was arrested. The shopper he'd picked up had a familiar face. Dortch had interviewed her, and watched her in action on tape. She was among the highest paid of the shopper profession, reportedly because of her ability to throw angry fits, boldly asking store clerks to call security on her behalf and engaging in other antics that nearly always resulted in a successful return, refund, or purchase of illicitly bought merchandise.
Meanwhile, the other group of agents entered the Quality Market and arrested 46-year-old Betya Kogan, who, according to court records, told investigators that she did not have a purse with her when they asked if she had identification. In Russian, she told a store clerk to "go to the back and bring only my wallet from my purse, and bring it here." But this time there was a problem. Court records say Fred Ponomarenko, an investigator with the San Francisco District Attorney's Office, happened to be standing next to Betya, and he understands Russian quite well.
In her purse, agents found a bundle of 15 stolen credit cards wrapped in their mailers, along with slips of paper containing personal information on the card owners. When police accompanied a handcuffed Betya to get her car keys from the store safe, they found another surprise: a semiautomatic handgun on its top shelf.
Boris and Betya Kogan were released on bail shortly after their arrests. Six months later, the San Francisco Examiner featured Betya and the market on the cover of the paper's Epicure section, in a story that explained how Russian Jewish immigrants were bringing new culture to San Francisco.
The following December, Betya pleaded guilty to felony charges of receiving stolen property, and Boris pleaded guilty to misdemeanor burglary. They were both sentenced to three years' probation.
Despite the wealth of information they'd gained by following and taping Igor Kogan and other members of his Russian crime network, investigators remained stumped on one particular question: How were the thieves gaining access to the accounts? Somehow, they were managing to get new, stolen credit cards authorized for use.
Of course, there were hints. A few of the shoppers federal agents managed to interview made reference to bigger players in the crime network, players who had mysterious connections who authorized stolen cards. There were rumors that shadowy government officials and corporate insiders played a role in the scam, and that a mysterious 800 number was used in the process.
Finally Dortch interviewed a lower-level thief who'd been busted for shopping with a stolen credit card. Among her belongings was a small slip of paper on which an 800 telephone number had been scrawled. Dortch called the number, and found himself talking to Backcheck, an investigations company in Texas that also did business as a public records research firm called Biosearch.
Accompanied by a Texas Ranger, Postal Inspector Dortch called on the firm, located in a nondescript office in a nondescript strip mall in San Antonio. Biosearch was owned by Daniel Coonan, a former Air Force officer, who, after retiring from military service, began a private investigative firm specializing in background checks for businesses in California and Texas.
Coonan was apparently operating under the mistaken impression that his firm was doing a lot of business for a group of European businessmen who dealt with real estate investments and required background information as part of title searches. Because these supposed businessmen had problems paying their bills at one point, Biosearch had set up a system that allowed them to pay through a deposit-only account at Bank of America.
And that was that. One phone call with the name and address of a card owner (taken from the mailer around a stolen card), a deposit of Biosearch's $90 fee at the bank, and the firm produced a Social Security number and date of birth for the card owner. Armed with that information, a thief like Kogan would call the credit card company, which would authorize the card for use (without the call having come from the home phone of record, another way of automatically authorizing the card).
Coonan soon began reporting to federal agents each time the account was used, and by whom, according to court records.
The Biosearch account, investigators say, was originally opened by a man who was arrested several times during the mid- to late 1990s on theft and assault charges in San Francisco and San Mateo counties, most related to alcohol. Investigators say the man liked to brag about his business in bars populated by Russian immigrants on the west side of San Francisco. Also, he had the outward trappings of success, including expensive cars and clothing, and appeared to have connections; he could, it became known, make stolen credit cards work.
The aura the man built around himself, investigators say, helped to popularize the credit card theft business in the Russian crime community. Actually, though, how this particular thief learned to activate stolen credit cards was a less-than-impressive story. It was a story in which dumb luck and pathetic romance played leading roles.
The start of the story involves the man's arrest, in 1996 on a charge he'd assaulted his girlfriend. After the charges were dropped for lack of evidence, he returned home to find that the girlfriend had left. Desperate to find her, the man opened the San Francisco Yellow Pages, apparently looking for a private investigator, and found an advertisement for Biosearch, the San Antonio firm. The company supposedly provided enough information to the man to locate his lost love -- and to help him conceive the idea at the heart of the Russian credit card game.
By 1999, the lovelorn credit card thief was in state prison, having pleaded guilty to felony theft charges in San Mateo County. Federal investigators allege that he gave his Biosearch account to two men, one of whom has since left the country. The other, they believe, is Mikhail Moiseev, who they allege authorized stolen credit cards for other thieves and eventually became a crime partner of Igor Kogan.
Along with the plethora of MasterCards and Visas stolen from Bay Area mailboxes, postal inspectors noticed that a great many Macy's Department Store cards were being stolen. A number of these cards had been used to purchase $500 gift certificates at Macy's, which could, in turn, be used to buy merchandise in a way that was nearly as untraceable as if it were cash.
One afternoon, a federal agent followed one of his suspects in the credit card case to the Macy's store at Union Square in downtown San Francisco, where he recognized a woman who got out of the car and entered the building through a door marked "Employee Entrance." Inna Zeldovich, the woman who entered the store, was no stranger to law enforcement. Zeldovich at one point was evicted from a condominium in San Bruno after essentially squatting there under a sublease arrangement that the landlord had not approved, and then ceasing to pay the rent. (In fact, court records show that when investigators followed her to work at Macy's, her wages were still being garnished to satisfy that landlord's claim.)
At the direction of federal agents, Macy's security force directed its store cameras on Zeldovich, who was working as a clerk. The cameras allegedly caught her activating stolen Macy's cards from her cash register and selling gift certificates to accomplices who were using stolen credit cards. She was indicted in federal court along with Moiseev, Kogan, and Ilyagueva, and last month pleaded guilty to conspiracy and unlawfully using personal information to gain access to credit.
One more piece of the Russian credit theft puzzle had been put in place. And solving that puzzle proved fruitful beyond just capturing Bay Area criminals. "Our goal was to identify who the bad guys were, what their MO [mode of operation] was, and try to find out things to make use of that MO in other areas," says Dortch.
"In a lot of variations, it's the same [pattern] outside of the Bay Area as well. Basically, when we had the intelligence that we got off of this crew, it gave us insight into how these crimes are being committed."
But as you read this sentence, someone else is almost certainly stealing a credit card somewhere in the Bay Area. Despite all that was learned chasing this particular network of thieves, the epidemic continues. "They're only limited by their imagination," Dortch says.
And their nerve.
In May 2001, a posse of postal inspectors, FBI agents, and local police showed up at the crack of dawn at Igor Kogan's parents' home in San Bruno, where they found and arrested a sleepy Kogan still in his skivvies. Simultaneously, Diana Ilyagueva and Inna Zeldovich were also arrested. Moiseev was taken into custody a few months later.
In December, Kogan pleaded guilty to federal charges of conspiracy, theft, and credit card fraud in San Francisco. Last month, Diana Ilyagueva and Inna Zeldovich also pleaded guilty to charges related to credit card theft. They are scheduled to be sentenced in March.
Mikhail Moiseev jumped bail in November, and apparently took off in a 2003 Ford he'd rented from Enterprise Rent-A-Car in San Bruno. He was recaptured last month in Monterey County, allegedly in possession of six stolen credit cards.