FREE
Landfill operators reach agreement with airquality regulators
Ex-con charged with animal cruelty for allegedly killing puppy
PG 02
PG 23
MONDAY, JANUARY 22- JANUARY 28, 2024
VISIT SANGABRIELSUN.COM
VOL. 13,
NO. 156
How Walmart’s financial services became a fraud magnet
LA city controller to review Housing Department’s affordable housing efforts
By Craig Silverman and Peter Elkind, ProPublica
By City News Service
This story was originally published by ProPublica. ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for The Big Story newsletter to receive stories like this one in your inbox.
Walmart. | Photo by Mike Mozart CC BY 2.0 DEED
C
hristy Browne was in a panic. The man on the phone said he was from the FBI. He warned her that drug traffickers had obtained her Social Security number and were using it to launder money. He said the FBI needed money to catch them. “They told me not to go to local law enforcement,” Browne testified in court recently about the February 2020 call. The police were watching her and considered her a suspect, the man said. At his direction, Browne, a retired elementary school teacher who lives in upstate New York, bought four $500 Walmart gift cards at her local Walmart. It was 3:15 pm. She took photos of the serial numbers and PINs on the back and texted them to the man on the phone. With that information, the fraudster had access to $2,000. That was only the first step. The gift card numbers were then sold to Qinbin Chen, a Chinese national living in Virginia. At 5:47 pm, Chen passed the numbers
to a co-conspirator waiting near a Walmart in Sterling, Virginia. Just eight minutes later, at 5:55, the accomplice did something that an ordinary consumer would rarely do, but which is routine for fraudsters: use one gift card to buy another. With the numbers from Browne’s Walmart cards, he purchased Apple, Google Play and other gift cards at the store’s selfcheckout kiosk. He sent the serial numbers and PINs for those cards to Chen, who then sold them to a buyer in China. Transferring the money to other companies’ gift cards for use in another country made it impossible for Walmart to figure out where the funds ended up. Browne had no way to recover her $2,000. She was far from the only victim. Chen oversaw the laundering of some $7 million in fraudulently obtained gift cards, according to the Department of Justice. It was a complex international operation involving hundreds of victims,
thousands of gift cards and multiple co-conspirators in the U.S. and China. Federal prosecutors would give it a simple name: “The Walmart scheme.” America’s largest retailer has long been a facilitator of fraud on a mass scale, a ProPublica investigation has found. For roughly a decade, Walmart has resisted tougher enforcement while breaking promises to regulators and skimping on employee training, according to more than 50 interviews, internal documents supplied by former industry executives, court filings and other public records. Scammers dupe a victim, as they did with Browne, and then they exploit Walmart’s lax systems to get paid quickly and easily. That’s been true whether the fraudsters use Walmart gift cards or instruct customers to send funds by electronic money transfer. The company, in the latter instance, is supposed to be on the lookout for fraud and asking questions: Do you know the person you’re
sending money to? Is the money transfer related to a telemarketing offer? Too often, Walmart has failed. More than $1 billion in fraud losses were routed through the company’s financial systems between 2013 and 2022, according to filings by the Federal Trade Commission and court cases analyzed by ProPublica. That has helped fuel a boom in financial chicanery. Americans, many of them elderly, were swindled out of $27 billion between 2013 and 2022, according to the FTC. Walmart has a financial incentive to avoid cracking down. It makes money each time a Walmart gift card is used and earns a fee when another brand of card is bought. And it receives one commission when a person sends a money transfer and a second when the recipient picks it up. The company’s financial services business generates hundreds of millions in annual profits. (Its See Walmart Page 12
An affordable housing complex. | Photo courtesy of the Los Angeles Housing Department
L
os Angeles City Controller Kenneth Mejia announced Thursday that his office will conduct a new performance audit to review the Housing Department’s efforts to ensure affordable housing. The audit is intended to examine the Los Angeles Housing Department and its contractors’ efforts on affordable housing, monitor the occupancy and physical habitability of these units, and evaluate the effectiveness of LAHD’s monitoring protocols for income and rent verification, and unit vacancies. Additionally, the audit seeks to determine whether the department’s occupancy monitoring program and code inspection program are effectively enforcing affordability restrictions and ensuring these units are safe for tenants, Mejia’s office said in a statement. “Affordable housing in the city of Los Angeles is more important than ever given the ever-increasing cost of living in the region,” the controller’s office said in a statement. “It is crucial for the city to develop and preserve as much affordable housing as possible, to ensure that the housing is available for those who qualify, and for this housing to be safe and suitable for living, and with access to resources.” The controller’s office previously conducted audits on activities related to affordable housing production, tenant income eligibility and preservation of existing affordable housing stock in 2007 and 2017. Audits are conducted by the Audit Services Division of the controller’s office, which remains despite any changes of administrations. Last year, the LA City Council approved a motion seeking to improve the city’s housing inspection capabilities to ensure timely and quality repairs for renters, as well as to See Affordable housing Page 24