Nordstrom Online Crime Wave Ends With 2 Year Jail Terms For Brothers

August 13, 2012

In 2008, brothers Andrew S. Chiu, 29, of Anaheim, CA, and Allen J. Chiu,  37, ofDallas, TX were barred from ordering merchandise from because of their excessive refund claims falsely based on assertions that ordered merchandise had never been delivered.

Soda Shoppe Side Bar: Oh my! BARRED from online ordering. Sort of reminds me of those school days when the local soda shoppe (remember when there were "soda shoppes" and they added the extra "-pes" to their names?) barred or banished you from the premises.

Ahhh, for the days of a frosted metal blender container filled with malted milk or an ice cream soda, and straw wrappers to blow into the air, and seats to spin around on - which got you yelled at by the soda jerk; which, inevitably, resulted in your being banished, sometimes permanently, from the establishment.

None of which had anything to do with untwisting the cap on the salt shaker or filling the top of the sugar shaker with salt.  And none of which had anything to do with laughing so hard that the milk shake came out your nose or your idiot friend pushing H21 instead of H12, resulting in the jukebox playing "Strangers In The Night" when you wanted to hear "Light My Fire." Oh for the days when a bunch of smart aleck teenager hung around the paperbook rack near the pharmacist's counter reading the dirty parts .

Sorry. I digress.

So - let's return to this Nordstrom's online crime wave. Imagine.  Online customers complaining about problems getting delivery on their online purchase.  Wow.  As if that never happens - yeah, right.

Dell Laptop Order SIDE BAR: "Street Sweeper" readers may recall my ranting and raving about purchasing a new Dell laptop:

The result of my inability to get fulfillment of an online order from Dell, prompted me to purchase an ASUS.  As of the writing of this article, some nine months later, I am pleased to announce that the ASUS laptop has been working perfectly, the double drives arrived properly configured, and I have moved on from my former relationship with Dell.  But Dell and I will always have Paris. Dell came in silvery grey. My face was enraged blue. My stuck keyboard key didn't amount to a hill of beans. All of which positively guarantees that within an hour, my ASUS will crash and burn and all my data will be lost.   Talk about puttin' the ol' kibosh on something best left unspoken about.

As to the Chiu brothers, well, maybe they did place some honest-to-goodness orders with that went awry.  However, that's a really big benefit of the doubt because despite having experienced what they claimed were many failed deliveries, the brothers continued to place orders with  I mean, c'mon guys, if is jerking you around with lost online orders that never arrive, why the hell are you continuing to shop there?

Cash Back

So why would two young men continue to order from an online retailer that just can't seem to get the order fulfillment part of the scheme down pat?  Part of the answer  appears to be: FatWallet, Inc. What's FatWallet?  According to the company's "FatWallet Story" webpage:

The Best Deals Made Better

Back in 1999 with a $100 budget (cost for a domain name for three years), Tim Storm, Founder of FatWallet, started an online coupon community. It was originally presented as a forum for people to share coupons and deals. The concept quickly grew into a savvy online community where members not only shared coupons and deals, but all kinds of helpful consumer information including shopping tips, scam alerts and personal investment advice.

Today, FatWallet is now a popular online resource for millions of shoppers to compare, share and find thousands of the latest deals, coupons and retailer discount offers. FatWallet offers consumers additional savings by sharing a portion of their affiliate revenue in the form of Cash Back (over $29 million to date). Using pay-for-performance advertising, FatWallet has directly impacted over $1.2 billion in transactions for partnered merchants since 2005. FatWallet ranks as one of the top 1,000 websites worldwide (Compete).

FatWallet is committed to promoting what's good in their local community, making material contributions that have lasting impact on youth activities and education infrastructure. Throughout each year, FatWallet and its charitable foundation donate a percentage of profits totaling hundreds of thousands of dollars to a variety of national causes and regional events.

The Flaw

Turns out that the Chiu brothers were members of FatWallet, and had been paid by that online marketer for various online retail purchases, including those the two men had made at  Nothing like a Cash Backprogram to motivate folks to hit the "order" button. All of which would be fine but for the fact that in January 2010, the Chius apparently discovered that had a flaw in its programming code for blocked orders that were never shipped to the customer  and did not result in a credit card charge.  The programming quirk that the Chius exploited allowed them to intentionally place orders that blocked but, notwithstanding, the retailer compensated FatWallet for the order, and the brothers received credit from FatWallet - in a sense, both Nordstrom and FatWallet were victimized by the brothers' scam. The Chius got cash back for orders that never went through and for which they were never billed.

Now you might think - and, frankly, it's what I was thinking as I first read through this case - that we're dealing with a couple of online scammers who are ordering a few suits, some socks, maybe a bunch of ties.  Roll your chair back from your keyboard. I don't want this shock to cause you to enter any online orders.

A Whopper!

Between January 2010 through October 2011, the Chius entered over $23 million in fraudulent orders that elicited some $1.4 million in rebates and commissions from the victimized retailer, of which at least $650,000 constituted direct fraudulent cash-back payments. Ultimately, the U.S. Attorney's Office was able to seize more than $970,000 in illegally derived assets, which will be applied toward the restitution owed to Nordstrom.

What They Faced

According to federal sentencing guidelines, each brother faced up to a maximum of 20 years in prison and a $250,000 fine.  On April 9, 2010, the Chius pleaded guilty in federal court in Seatlle, WA to wire fraud and pursuant to their plea agreement, they faced up to 30 months in prison (pursuant to the then anticipated prosecutors's recommendation to the Court).  In seeking the two-year sentences, prosecutors wrote to the Court:

The actions of the Chiu brothers are equivalent to someone discovering that a back door to a Nordstrom store had been accidentally left open, and then walking in through that door to steal $1.4 million from the till… This was not a quick and hasty crime, done with any agonizing guilty conscience. The Chius methodically submitted orders, day after day, for nearly two years until they had ordered an eye-popping $24 million worth of merchandise. In order to try and avoid detection and suspicion, they had to constantly create new user names at FatWallet, and make sure not to order too much merchandise at once on any one user name. This was a crime committed in a calculating, careful manner over a long period of time.

What They Got

On August 10, 2012, the Chius were sentenced to two years in prison.  The error that permitted the continued payment of rebates in the ordering system has since been fixed.