US Attorney Reports Arrest Of Four In Check-Kiting Scheme That Cost Banks $4 Million

LAWFUEL – The Legal Newswire – Four people associated with a fraud ring that cost banks more than $4 million have been arrested by federal authorities, who also seized dozens of counterfeit identity documents, as well as checks and ATM cards associated with fraudulently opened bank accounts.

Sam Byung Kim, 33, of Gardena, and Ha Lim Jeon, 28, of Los Angeles, were arrested Monday on federal fraud charges for their participation in a scheme that allegedly used “kited” checks and fraudulently obtained merchant accounts to defraud Washington Mutual Bank, Wells Fargo Bank and Bank of America.

The alleged organizer of the ring, Che Wung Lee, 46, of Los Angeles, was arrested Sunday while shopping on Rodeo Drive in Beverly Hills with an associate, Hae Joo Lee, 28, of Los Angeles. The two Lees are currently in jail, and, after a brief counrt appearance this afternoon in federal court in Santa Ana, they were ordered to return to court on October 11 for a detention hearing.

Agents from the United States Postal Inspection Service (USPIS), the Federal Bureau of Investigation, and U.S. Immigration and Customs Enforcement (ICE) executed five search warrants in recent days in Koreatown, Palmdale and Gardena. Agents recovered cash, hundreds of checkbooks and ATM cards associated with fraudulent accounts, counterfeit Korean passports, counterfeit United States Visas, and various United States and Korean Driver’s Licenses.

“These searches and arrests have shut down a complex kiting scheme that stole funds totaling over $4 million,” said Los Angeles Division Inspector in Charge B. Bernard Ferguson. “The United States Postal Inspection Service remains committed to the investigation of crimes carried out through the U.S. Mail that target our nation’s businesses.”

J. Stephen Tidwell, Assistant Director in Charge of the FBI in Los Angeles, said: “This case is yet another example of multiple agencies working together to successfully investigate complex criminal activity and arrest multiple individuals suspected of the alleged fraud. The FBI will continue to support the Postal Inspection Service and ICE in this multi-agency investigation with all necessary resources.”

Beginning in 2002, Lee allegedly opened approximately 30 fraudulent merchant processing accounts for non-existent businesses. Merchant processing accounts are set up so that businesses can process credit and debit card transactions. Businesses can only get a merchant processing account once they have established a business bank account and verification has been made to determine that the business is legitimate. According to court documents, Kim, the owner of Universal Payment Tech, a company that processes merchant processing accounts, set-up at least five of Lee’s fraudulent merchant processing accounts.

According to the court documents, Lee established false identities by using counterfeit passports to obtain social security numbers and fraudulent Alaskan driver’s licenses. These fraudulent identities were used to establish the merchant processing accounts.

Lee’s co-conspirators allegedly opened personal checking accounts using counterfeit Korean passports and United States Visas, kited checks to fraudulently inflate the balances in the personal checking accounts and then used the merchant processing accounts to withdraw the fraudulent funds from the personal accounts. The funds were then wired out of the country or used to pay bills, including mortgages.

Robert Schoch, special agent-in-charge of ICE investigations in Los Angeles, stated: “Use of fraudulent identification documents by individuals in violation of our immigration laws is a significant concern to ICE, regardless of the underlying criminal offense. Given the stakes and risks involved, ICE will not allow criminals or criminal networks to jeopardize our nation’s security to satisfy their own greed.”

All four defendants are scheduled to be arraigned on October 15. Jeon is currently being held without bond. Kim was released on a $50,000 bond.

The defendants are charged in a criminal complaint with bank fraud, a charge that carries a maximum statutory sentence of 30 years in federal prison.

A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.

This case was investigated by the United States Postal Inspection Service, the Federal Bureau of Investigation, and U.S. Immigration and Customs Enforcement. This case is being prosecuted by United States Attorney’s Office.

CONTACT: Assistant United States Attorney Jennifer Waier

(714) 338-3550

Release No. 07-128

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