Can you handle getting detained?

[Matt]

Depending on which blogs you read, you might be committing crimes, or not, in the pursuit of points. But in either case does that actually matter if you get detained?

An important consideration for the masses who are swarming into the land of manufactured spending is that the exact same event can create different outcomes. This is what they call ‘YMMV’ (your mileage may vary). When it comes to a retention offer on a credit card, you might want to ‘HUCA’ (hang up, call again) but when it comes to being detained, do you have the knowledge and ability to HUCA?

For me, I would correlate a HUCA when detained to demand a lawyer. That changes the dynamic of the person you are talking to, as you drop one surly agent (the officer) and communicate with someone more favorable (your lawyer). But would you do that, or would you try to defend yourself because you are innocent? Funnily, if you listen to some blogs, you might think you are innocent, but really are guilty of a Federal crime, which we could all chuckle about in a guest post later on.

Just imagine, for a moment, if you were detained in Walmart, as happened to Tahsir last night, and you explained that you were liquidating $40K of gift cards in structured transactions to avoid reporting requirements, because you read about it on a blog and that blogger seemed really nice (for a girl) and helpful.

But let’s go a step further. What if you only did $2,000 per month in money orders due to your float level, and committed no crimes. You were walked to an office, by a cop and a special agent for the IRS and your boss, or a key client walked by, they kept you there for questioning for an hour, and let you go.

Could you explain yourself the next day? Would it even matter if you could? It’s really important to consider how emulating those you read about can cause huge damage to your life. Whether it be to commit a crime, or whether you are doing things legally, but just appear sketchy. When it comes to someone like Tahsir he isn’t committing crimes, and what is more, it wouldn’t matter to his boss if he appeared sketchy because he doesn’t have a boss. The situation, holistically is very different.

A lot of people don’t think about this when they try to copy bloggers who fly in first class, and a lot of bloggers don’t really care if you appear sketchy, get fired, or go to prison. Don’t forget, they often exist to sell you a credit card, and what you do with it is up to you. YMMV.

Please, don’t commit crimes, and don’t bury your head in the sand in the pursuit of points. You can get plenty of them without crossing lines.






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[sriki]

Was he structuring? My mind remembers seeing something in the blog post along the lines of I asked for the money order forms and entered the details.

 

[janetdoe]

https://www.fbi.gov/seattle/press-releases/2012/brothers-who-defrauded-nordstrom-with-online-reward-scheme-plead-guilty-to-wire-fraud

When you are doing ridiculously large amounts of manufactured transactions for the purpose of earning rewards/rebates, and when you know or should have reason to know that such transactions should not earn rewards, you can probably end up in jail. There are fraud laws as well as tax laws.

It really depends on the language in his CC T&C, whether they purposely exclude cash equivalents (e.g. VGCs) from earning rewards. If that is the case, the fact that the bank is erroneously awarding him cashback on these purchases (i.e. they let him do it) is probably not an adequate defense should the feds decide to prosecute. I'm not sure if it would be a valid defense in a civil lawsuit.

In either case, putting out a blog post with your name on it, admitting that you do millions of dollars worth of transactions for the sole purpose of generating tax-free rebates, is one of the more indiscreet and flat-out stupid things I have seen in this hobby.

Was he structuring? My mind remembers seeing something in the blog post along the lines of I asked for the money order forms and entered the details.

My first answer is no, because he claims they filled out the paperwork.

But that does raise the question... he mentions that he does $20k on a normal day, and he was buying $5.5k and his friend was buying $15k. So the real questions are:
1. Did he only do $5.5k on MOs that day, and all his transactions at the one store? If he broke up the transactions into amounts smaller than $10k at different stores, that could be problematic.
2. Was the friend buying $15k on his behalf, and if so, did they fill out the paperwork truthfully? The paperwork definitely asks if you are buying the MOs on behalf of another person.

So yes, it is quite possible that, even filling out the paperwork, he did something that would run afoul of the structuring or BSA laws.

 

[sriki]

But that does raise the question... he mentions that he does $20k on a normal day, and he was buying $5.5k and his friend was buying $15k. So the real questions are

That's a good point. I wonder if he lied on the form. If so, I wouldn't want to hang around (when given the chance) unless my "buddy" is buying those MOs for himself. Even then, for an IRS agent, it "must" look fishy.

 

[Alcibiades]

I guess the answer is yes, since I was detained by 3 police officers and MS much more now than I ever did back then.

 

[janetdoe]

That's a good point. I wonder if he lied on the form. If so, I wouldn't want to hang around (when given the chance) unless my "buddy" is buying those MOs for himself. Even then, for an IRS agent, it "must" look fishy.

Well, they certainly have is name, address, and probably a copy of his DL. No need to make a federal case overnight, they have months to look into it.

 

[Alcibiades]

When you are doing ridiculously large amounts of manufactured transactions for the purpose of earning rewards/rebates, and when you know or should have reason to know that such transactions should not earn rewards, you can probably end up in jail. There are fraud laws as well as tax laws.

A credit card company might have cause to clawback points and miles or perhaps sue you for their value, but there is nothing criminal occurring. Not to sound trite, but jail is impossible.

 

[Alcibiades]

Not that fooling around with tons of money orders wont attract negative attention, but you can only structure with Currency. All structuring cases that involve money orders involve the use of Cash to obtain the money order.

 

[janetdoe]

A credit card company might have cause to clawback points and miles or perhaps sue you for their value, but there is nothing criminal occurring. Not to sound trite, but jail is impossible.

The crime most likely to be charged would be wire fraud.

Did you read the article I linked to? The facts were structurally similar... Millions of dollars of transactions, solely for the purpose of obtaining rebates, when the purchaser had reason to know that no rebates should be earned on the transactions, but the electronic systems issued the rebates erroneously. 2 years jail time.

Put on your legal thinking cap - how is the Chiu case substantially, legally, differentiable from spending $5 million a year on a cashback card, buying gift cards and other cash equivalents that are excluded by the T&C, and getting the cashback because the automated system fails to prevent it?

I think it's definitely arguable, and I would hope you could use some of the hundreds of thousands of dollars in rebates to hire a smart enough lawyer to argue your case. But the point is when the offense gets large enough, gets indecent enough, something that would normally be glossed over or ignored can be construed as 'a scheme to defraud'. The wire fraud statutes are written extremely broad to be a catchall when another law doesn't seem to apply. And these transactions (CC transactions, redeeming the rewards) are run over wires. <shrug>

People HAVE gone to jail for exploiting an purchase rebate/rewards system for hundreds of thousands of dollars in the past few years. So to say it's 'impossible' is a bit optimistic.

 

[Matt]

Not that fooling around with tons of money orders wont attract negative attention, but you can only structure with Currency. All structuring cases that involve money orders involve the use of Cash to obtain the money order.

For the rest of the group here, I'd recommend ignoring this advice.

 

[Someone]

@janetdoe - the chius had an intent to defraud. Tahsir did not. You are not even in the same ballpark.

 

[janetdoe]

@janetdoe - the chius had an intent to defraud. Tahsir did not. You are not even in the same ballpark.

He is creating transactions that are specifically excluded from earning rewards, for the sole reason that they earn rewards by a system oversight.

The Chius were specifically placing orders that were excluded from earning awards, for the sole reason that they earn rewards by a system oversight.

How are they different? Are you suggesting that Tahsir honestly believes that his bank would be happy to pay him the rewards if they knew he was buying VGCs? He has devised a complicated scheme to receive 5-figure amounts of cash rebates each month, from an entity that he knows does not intend to pay rebates on the transactions he is making. How is that not intent to defraud?

 

[Andres]

Does that means that my relatives are actually right, I'm breaking the law? Say it ain't so

I guess the Chiu brother's case sets a bad precedent for MS types. Basically, CC companies could force us to pay back all the miles/points/cash that we have extracted from them. It seems that you just have to MS up to a certain point, but anything over that point might put you in hot water. So the question is, where is the line at?

 

[Josh F]

He is creating transactions that are specifically excluded from earning rewards, for the sole reason that they earn rewards by a system oversight.

The Chius were specifically placing orders that were excluded from earning awards, for the sole reason that they earn rewards by a system oversight.

How are they different? Are you suggesting that Tahsir honestly believes that his bank would be happy to pay him the rewards if they knew he was buying VGCs? He has devised a complicated scheme to receive 5-figure amounts of cash rebates each month, from an entity that he knows does not intend to pay rebates on the transactions he is making. How is that not intent to defraud?

Sorry, cases are totally different. First off, they were both barred from ordering merchandise from Nordstroms. They then exploited the fact that they were barred to profit. Only after that point were they arrested. Had they ceased & desisted after initial being barred, it seems like they would not have been arrested. Tahsir is using the system to its fullest advantage (at this point). If at some point, Tahsir is warned/barred from doing that action AND continues to do it afterward, then my view would be different. I'm not saying his banks/credit cards would be happy with what he/they/us are doing, but if they decide he/they/us have had enough then that's a different story... I'm not saying every illegal situation requires a warning first, but there's a reason Nordstrom just barred him initially instead of pursuing a criminal case.

 

[Hplx32]

Either way, it almost sounds like a publicity stunt...

 

[janetdoe]

Does that means that my relatives are actually right, I'm breaking the law? Say it ain't so

I guess the Chiu brother's case sets a bad precedent for MS types. Basically, CC companies could force us to pay back all the miles/points/cash that we have extracted from them. It seems that you just have to MS up to a certain point, but anything over that point might put you in hot water. So the question is, where is the line at?

I think if you sample a grape in the produce aisle, that is technically stealing. But one could easily argue that nobody minds, that sort of sampling is expected, and one is perfectly safe indulging.

However, if you sit down in the aisle and eat a pound of grapes, then walk out and brag to everyone in the parking lot about the way you you get tons of free grapes and you're never going to stop, that is stupid. It's the same crime, but the amount and flaunting it are much more likely to draw consequences.

Do I think anyone who is aware that VGCs are excluded from earning points, but still goes around buying some gift cards now and then and then redeems the points online is committing wire fraud? Not really - I think that technically a case could be made, but it is entirely unlikely due to the low stakes, much like sampling a grape at the grocery store. Any consequences would almost certainly be handled at a clawbacks/account closure level, if any.

Do I think that anyone who uses MS to produce a 5-figure monthly tax free income by making purchases that are not supposed to earn points/rebates is committing wire fraud? I honestly don't know. But I do know that at some point, it starts to look a lot more like an intentional "scheme to defraud" to a potential jury. And publicizing the activity and pointing out all the tax laws that are NOT being broken doesn't change the fact that there are some fairly broadly written rules (especially wire fraud, RICO, etc) that allow prosecutors to charge crimes when no other law seems to fit the case.

 

[HTaufReisen]

Tahsir's middle name must be "Low Profile" ;-)
Ghee - I would have just left the store and call it a day.
And now he has to counter every nasty response at the other open blog - that's really helpful.
Very unprofessional.

 

[CruisingFlying4life]

Either way, it almost sounds like a publicity stunt...

One way to cover it up is to have hundreds of other people continue to do it. Then, maybe, the "mob" scheme will save us all from trouble... We can all say it was the banks' fault for being sneaky in their T&Cs.

 

[redbirdsj]

A little late to the party on this. The Chiu case is bad precedent for MSers. It demonstrates how stacked the system is against criminal defendants when the Feds are involved.

However, I think the case is differentiable for two reasons already cited: (1) the Chius had already been banned from ordering from Nordstrom (which is an important fact showing that Nordstrom would have never intended to pay on their "orders") and (2) there was not evidence that Nordstrom had paid rebates to hundreds if not thousands of other customers in similar positions as the Chius, as there is with CC companies paying rebates to cardholders purchasing prepaid cards. The case against MSers would be based on T&Cs that would be interpreted against the company which drafted them. The fact that companies have regularly paid the cashback out in the past is "course of dealing" evidence that the T&Cs were waived in that respect. If a CC company bans a customer and that customer discovers that his credit card is still working and continues to MS, that is a different story.