Owner of a Santa Ana payment processing company charged with multi-million dollar fraud

Department of Justice

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FOR IMMEDIATE RELEASE: Thursday, June 25, 2015

Owner of California Payment Processing Company Charged with Fraud

The Justice Department announced today that the owner and operator of a payment processing company that was involved in the unauthorized withdrawal of millions of dollars from consumers’ bank accounts was charged with fraud.

The criminal information, filed in the Eastern District of Pennsylvania, charged Neil Godfrey, 76, of Santa Ana, California, with one count of wire fraud. Godfrey owned and operated Check Site Inc., based in Santa Ana, which from 2006 to 2010 enabled fraudulent merchants to withdraw money from consumers’ bank accounts without the consumers’ knowledge or consent. If convicted, Godfrey faces a statutory maximum sentence of 20 years in prison.

According to the information, Godfrey worked with at least two fraudulent merchants who operated websites that purportedly offered payday loans. The websites were simply a ruse to harvest consumers’ bank account information. Instead of providing consumers with payday loans, the merchants operating the websites used the information provided by the consumers in loan applications to withdraw money from the consumers’ bank accounts. Using Check Site, Godfrey knowingly processed the merchants’ fraudulent withdrawals and provided the merchants access to the banking system

“Neil Godfrey used his understanding of the banking system to help his partners in crime steal money from hard-working, often low-income Americans,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The amounts that were illegally withdrawn generally did not exceed a few hundred dollars per victim, but the scheme was so massive and went on so long that altogether it added up to millions of dollars in fraudulent withdrawals. As this prosecution demonstrates, the Department of Justice will continue to prosecute individuals and corporations involved in this kind of fraud.”

The information alleged that, once the fraudulent merchant had obtained the consumer’s name and bank account information, the merchants involved in the scheme created a demand draft, also known as a remotely controlled check (RCC). Unlike an ordinary check, an RCC is generally honored without the signature of the account holder. Check Site submitted the RCC to the consumer’s bank. When the RCC was processed, Check Site kept a fee and transferred the remainder of the withdrawal to the merchant.

The information alleged that Godfrey was an expert in finding banks that were willing to facilitate these transactions and ignore the red flags raised by these transactions. Such banks included one located in Irvine, California, and one located in Philadelphia. The information also alleged that Godfrey helped the fraudulent merchants stay off the radar of other banks and regulators so that the fraud could continue. For example, Godfrey advised merchants how to change the names of their companies and set up the facade of a legitimate company to defeat banks’ attempts at due diligence.

In an email message quoted in the information, Godfrey advised a fraudulent merchant that “the lesson we have learned is that we must trick the [bank] folk. It means you need to set up some type of web site front. What we need to do is set up a legitimate website selling anything you can think of – that is what you get approved on. It is irrelevant if anything is ever sold there – just so it exists. . . . In the mean time we set up false credit card approval etcetera. It is this we use to run the transactions. Yes, there will be a lot of returns, but what we do is send through transactions over the next few weeks that don’t have high returns. They stop looking and then we can run the regular stuff. . . . [A]fter several months we junk that company and go to another company.”

“The defendant in this case exploited his knowledge of the banking system and exposed hundreds of consumers to fraud,” said U.S. Attorney Zane David Memeger for the Eastern District of Pennsylvania. “Those who circumvent our banking laws in order to enrich themselves by preying on unsuspecting consumers need to be investigated and vigorously prosecuted.”

Principal Deputy Assistant Attorney General Mizer thanked the Federal Trade Commission for providing attorney Michelle Chua to serve as a Special Assistant U.S. Attorney on the case and commended the FBI for its thorough investigation. The case is being prosecuted by Assistant U.S. Attorney Patrick J. Murray of the Eastern District of Pennsylvania and Trial Attorney Patrick Jasperse of the Civil Division’s Consumer Protection Branch.

A criminal information is an accusation. A defendant is presumed innocent unless and until proven guilty.

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