$15m ATM fraud after September 11

NEW YORK prosecutors said as many as 4,000 people used ATMs to steal $15 million from a municipal employees’ credit union whose computer security system was damaged in the September 11 attack.

Police said they had arrested 66 people and were seeking 35 others. But thousands more are under investigation in what already is one of the largest fraud cases to come out of the terrorist attack.

District Attorney Robert Morgenthau said the suspects found a way to repeatedly withdraw up to $500 a day from ATMs - even if their accounts at the Municipal Credit Union could not cover it.

The problem stems from September 11, when the attack on the World Trade Center damaged a nearby building housing the credit union’s computer system. The system was also affected by subsequent telephone system and power outages.

Credit union officials soon realised they could not properly monitor the computer network that handles automated teller transactions.

But they decided to allow withdrawals without the normal banking safeguards so they would not offend members affected by the tragedy. “This is a prime example of no good deed goes unpunished,” Mr Morgenthau said. “People took advantage.”

He said as many as 4,000 people manipulated the system to overdraw their bank accounts by at least $1,000. Of that group, more than 540 credit union members exceeded their balances by more than $5,000.

According to authorities, a 54-year-old nurse made 54 cash withdrawals from September 18 to the end of October, leaving her with a negative balance of $18,111.

A Housing Authority employee allegedly made dozens of withdrawals, using his credit union card to make purchases at a barbecue restaurant, a liquor store and a motel. A school safety officer allegedly made 80 ATM withdrawals in a five-week span, leaving her account more than $11,000 in debt.

The computer problem was fixed in November, and investigators began tracing the illicit withdrawals. Authorities said a handful of people, when confronted about the transactions, agreed to take out loans to pay the money back.

Since September 11, local and federal prosecutors have already charged more than 90 people on a variety of fraud counts, many involving false claims for assistance. No case has involved as many people as the one announced yesterday.