Published: Sat, November 4, 2017 5:00 AM
The owner of what once was a sizable gift cards store in Oklahoma City that played a major role in defrauding retailers of millions of dollars pleaded guilty in federal court on Friday to wire fraud and money laundering charges.
Leonard Ray Foster, of Oklahoma City, owned A-to-Z Giftcards, at 4507 NW 10, which was raided and shut down in March by local and federal authorities.
Prosecutors said Foster's business, which operated under Acquisitions Unlimited, LLC, bought unused or partially used retail gift cards from retail thieves for a fraction of the cards' face value.
With Foster's personal involvement, the business then sold the cards for their face values to Giftcard Zen, an online retail gift card exchange based in Phoenix, Arizona.
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Here's how the scheme worked, prosecutors said:
•People shoplifted large quantities of high-dollar items from Oklahoma City-area retail stores including Walmart, Lowe's, Target and Home Depot between May 2015 through March 2017.
•They returned the stolen items to the stores without receipts, taking advantage of store return policies that issued customers gift cards equaling the value of the merchandise being returned.
•Foster bought multiple gift cards from those thieves daily, knowing they had been fraudulently obtained. Indeed, prosecutors said he sometimes directed the shoplifters on where to go to commit their acts.
•By selling the cards through A-to-Z Giftcards to Giftcard Zen for their face value, Foster violated terms of service prohibiting the selling of gift cards obtained through fraud, prosecutors said.
Foster pleaded guilty to a wire fraud charge connected to a $59,035 transfer from Giftcard Zen to Acquisitions Unlimited's bank account on Dec. 9, 2015.
He also pleaded guilty to a money laundering charge connected to his withdrawal of $18,000 from Acquisitions Unlimited's bank account the following day.
Prosecutors said Foster acknowledged as part of his plea that losses associated with the scheme were between $3.5 million and $9.5 million.
Prosecutors said Foster could face up to 20 years of prison on the wire fraud charge, and up to 10 years of prison on the money laundering charge. He also faces fines of up $250,000 on each charge, and will be required to provide restitution to the retailers at an amount the court will determine.
Additionally, the federal government is seeking forfeiture of Foster's 1969 Ford Mustang, seized currency from Foster's accounts, and proceeds he made off the scheme.
Outcome cheered
Investigators involved in bringing down Foster's operations expressed pleasure when they learned Friday that he had pleaded guilty to the fraud and money laundering charges.
Norm Smaligo, a security specialist who had worked with one of the major retailers involved, said the deal represents a major victory.
"After A-to-Z closed, the level of returns for gift cards at our Oklahoma City area stores dove by 60 percent," Smaligo said. "They quit stealing the little stuff to refund when they couldn't redeem those gift cards any more."
But Smaligo added, however, that the problem is by no means vanquished and said retail theft issues continue to grow since voters approved State Question 780 in November 2016, which made property thefts misdemeanors unless the value of the merchandise involved is $1,000 or more.
The problem, Smaligo said, is that a caught shoplifter can't be charged with a felony — even after being caught multiple times — if the value of the merchandise they are caught with at any one time doesn't exceed the $1,000 amount.
And while criminals may not have as many places to convert fraudulently obtained gift cards for cash right now, they still are selling items they steal online, he said.
Smaligo, who was involved in lobbying to toughen Oklahoma's property crime statute earlier this year, said pending legislation would allow prosecutors to aggregate property offenses worth a total of $1,000 or more in a month's time into a felony charge.
He also said retailers still would like to see that time period lengthened to at least 90, or, as much as 180 days, noting California recently took that step to make serial thefts a felony.
"I kind of shake my head whenever I hear people whine we don't have enough tax money," Smaligo said. "At the same time, they want to cut the penalties for these serial shoplifters.
Oklahoma City Police Sgt. Craig Engles echoed Smaligo's statements about issues created by voters' approval of State Question 780.
Engles works as part of an organized retail crimes unit put together by the department as he and other officers were working the A-to-Z case.
As for that specific case, Engles said the retailers' theft specialists were key in helping police unravel the case.
"We were hugely surprised," he said, adding that the department knew something was happening because its shoplifting calls had greatly increased.
"There was just no way we would have been able to combat this thing without working with our retail partners. They provided us a huge amount of information," Engles said.