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Charter Pacific Bank and Friends

Taves et al (see Operators) were aided in this endeavor by the actions of Charter Pacific Bank (San Fernando Valley, California, see InterNic entry). According to an LA Times story reporting on FTC investigations (Jeff Leeds, 9/11/99) CP Bank sold Ken Taves about 900,000 (90%) "of the credit card numbers that he allegedly used to run up $45.7 million in mostly bogus charges against consumers worldwide". ^[12]

Apparently the bank made millions processing credit card transactions for adult industries. In addition to numbers harvested from the adult entertainment business, they also sold numbers from the two-third of the bank's 250 merchant accounts belonging to other merchant accounts including mail-order firms and retailers.

This bank has had a shady past, and it's not alone. In the words of an industry insider:

.. the focus should be on the banks or other card processing companies that willingly deal with the 'adult content' companies that are home to card fraud.

... [a 1990 investigation by a reputable bank found] a loosely connected ring of operators that, contrary to their documents submitted to open their accounts, were actually in porn & related businesses. This was sufficient reason for us to sever the accounts, but in the process of this investigation we discovered that their real business was processing fraudulent charges ... Even then their pattern was to open and close accounts frequently ... the law enforcement folks advised that even the business we were dealing with were really fronts for ... organized crime.

This Taves fellow is a carbon copy of several we uncovered. He probably gets a cut of the cash but most of it passes on to others offshore. As noted in one of your hyperlinks, the FTC has only been able to trace a small amount of the $45mm.

In summary, it is the bank processor that makes this whole thing work --- they are like the air supply to a scuba diver. The card issuing bank is not the bad guy. Virtually every bank in the country has safeguards in place to prevent them from finding themselves in business with these types of operators. Charter Pacific Bank has knowingly chosen to get in bed with these folks ... the reason naturally is money. Your typical local merchant pays a discount in the area of 2%. I'll bet these guys are paying Charter 5 to 8%.

Charter Pacific's history is particularly interesting. Again, from the same source:

The LA Times article was factually incorrect when it states that the bank was under an order to tighten controls as a result of bad real estate loans. In fact it was under a FDIC cease and Desist Order owing entirely to its Bank Card operation ... Interestingly, it was lifted in March of this year without comment by the bank as to what it had done to satisfy the many requirements.

This past week the bank's CEO issued a letter to shareholders regarding the LA Times article and TV coverage.... Interestingly, he did state that "other news stories may appear" as sort of a forewarning. I reviewed the bank's press releases and noticed that in August they were in the final stages of getting approval to move the Bank Card operation to a separate subsidiary. Undoubtedly they view this as a way to get better treatment from the regulators. For one, it will get the oversight away from the FDIC which only covers state chartered banks. Non-bank subsidiaries are covered by the Fed or OCC, I don't recall which.

Also this past week the bank issued a joint press release with a company called MerchantOnLine.com wherein they would be offering state of the art merchant services to online businesses. Since I know how careful banks are (or should be) in choosing partners, I decided to do a bit of digging. WOW! I wouldn't issue these guys a simple credit card, let alone process their cards or, heaven forbid, form a business alliance with them. It [MerchantOnLine.com] is an OTC bulletin board company that became "public" by means of a hocus pocus process involving a Colorado shell company early this year. Their reported sales are around $200k per quarter, they operate at a loss, and have a $400k deficit net worth. ... A typical pattern for these companies.

After doing some searches, I found that an investment newsletter thebigbulls.com actually shares the same office and telephone number with MerchantOnLine.com.   Other searches on the internet yielded numerous links back to MerchantOnLine.com for setting up internet merchant accounts. It appears that they are nothing more than a marketing operation that aggregates accounts to presumably be processed by Charter. Applications can be completed online. They delicately advise that they are specialists in handling 'off shore transactions', and that everything is "real time". In other words, "we'll connect you to the credit card processing systems and you can initiate any sort of charges you wish, and in the blink of an eye funds will be neatly deposited in foreign accounts."

When I first put this page up I thought that Taves et al were heavy users of credit card generator technology, or that they had stolen cards back when Taves worked processing other merchant accounts. It never occurred to me that a bank would sell Taves credit card numbers, or that US banks would operate so close to the edge. (It would be interesting to know if this bank was related to IN DEED INVESTMENTS.)

Below are the InterNic records for Charter Pacific Bank's would be partners:

This case just keeps on going and going.

The Operators

Removed 10/2/2000 to reduce my legal exposure. A non-specific summary is pending.

The Mastermind

Removed 10/2/2000 to reduce my legal exposure. A non-specific summary is pending.