June 25, 2009

Doug Nass, ARC

Field Investigations &Fraud Prevention

The Challenge of Outside Agents

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 2

More problems than ever…

• Why??• Fraudsters can easily hide their true identity• Host agents might not vet their outside agents• Can operate from anywhere in the world• Remote ticketing ability vs. remote booking ability

All parties are presumed innocent until found guilty in a court of law.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 3

Cast of Characters

• Mark Sxxxxxxxger - Chxxxl Valley Travel• Luis Arxxxxxriz - Noxxxxore• Jose Mxxxxyo - Elxxe Air Company• David Gxxl – American residing in Italy

All parties are presumed innocent until found guilty in a court of law.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 4

Mark Sxxxxxxxger Info

• Owner of non-ARC agency Chxxxl Valley Travel, Little Rock, AR, and Acxxxs to Travel, Pasadena, CA

• Began brokering FF miles in late 80’s/early 90’s• Outside agent for a number of ARC-accredited

agencies• Obtains customers through website

chxxxlvalleytravel.com• Associated with numerous other non-ARC agencies• Gained control of an ARC agency in Feb 2009

All parties are presumed innocent until found guilty in a court of law.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 5

Delta UATP Case

• Details• Discovered through routine FIT review (next slide)

• Account opened in early June 2008• Center For AIDS Prevention – Steve Neely, President• Former owner of Herbal Hope, Beverly Hills

• Account closed in early August 2008

• 216 tickets issued on 30 carriers for $690,000

• Case opened with the FBI in Little Rock, AR

All parties are presumed innocent until found guilty in a court of law.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 6

Fraudulent Itinerary Ticketing

All parties are presumed innocent until found guilty in a court of law.

Returning from the Beijing Olympics

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 7

All parties are presumed innocent until found guilty in a court of law.

Shady AIDS Charity With a Big Web Campaignby Christopher Weaver, ProPublica - March 24, 2009 11:44 am EDT

Peter Taback's first reaction to the Center for AIDS Prevention's prominent advertisement on the New York Times' Web site [2] was jealousy. Taback, communications director for the San Francisco AIDS Foundation [3], was impressed another organization had cast its reach so far.

But on closer inspection, his envy shifted to outrage.

Some aspects of Neely's past business dealings also raise questions. In the summer of 2005, Neely's company, World Preferred, a cellular phone retailer, dissolved, and he filed for bankruptcy in the Central District of California, claiming only $3,500 in cash and personal property, as well as two cars to his name. Court documents show he owed creditors more than $1.2 million, including $328,059 to the IRS. Five months later, an Illinois bank sued him in the same court, alleging he'd sold a Toyota Land Cruiser the bank had financed and pocketed the money instead of paying off his loans.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 8

Sxxxxxxxger’s Customer Base

• Hollywood crowd• Traditional and Risqué

• Thoroughbred horseracing community• Jockeys, trainers, owners

• Leader of Northern Irish political party Sinn Fein• Business travelers looking for bargains via the

internet

All parties are presumed innocent until found guilty in a court of law.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 9

Questions in Search of Answers

• Is the Center For AIDS Prevention opened by Steve Neely legitimate?

• How did Sxxxxxxxger gain control of the DL UATP account?• What is the relationship between Neely and Sxxxxxxxger?• Was Neely to receive a % of the total amount charged on the

account?• How was Sxxxxxxxger to pay Neely for use of the account?• Can Sxxxxxxxger prove that he paid Neely for use of the

account?• How did passengers pay Sxxxxxxxger?

All parties are presumed innocent until found guilty in a court of law.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 10

Luis Arxxxxxriz

• Non-ARC agencies:• Noxxxxore: West New York, NJ (most recent)• Nxxe Travel Service: West New York, NJ• Acxxxxrvices, West Union City, NJ• Others too numerous to list

• Long association with other non-ARC agents

All parties are presumed innocent until found guilty in a court of law.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 11

• Credit card and check “problems”• On a “cash-only” basis with some consolidators

• FIT • Airline interline billing schemes

All parties are presumed innocent until found guilty in a court of law.

Luis Arxxxxxriz

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 12

Reservations made by Arxxxxxriz

All parties are presumed innocent until found guilty in a court of law.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 13

Jose Mxxxxyo – Elxxe Air Company

• AKA “Joseph” Mxxxxyo• Cranford & Westfield, NJ area• UPS store used as address for the Cranford location• House address used for the Westfield location

• Website: airlinesbrokers.com• “Purchased” St. Augustine Travel, St. Augustine,

FL in January 2009• Owner of record placed agency up for sale via internet• No Change of Ownership paper submitted to ARC.

All parties are presumed innocent until found guilty in a court of law.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 14

• FIT review in mid-Feb 2009 revealed that something was amiss at St. Augustine Travel• Initially it was thought that Luis Arxxxxxxriz was involved

• Debit Memos for:• CC chargebacks for airline tickets• CC chargebacks for TASF’s• FIT

All parties are presumed innocent until found guilty in a court of law.

Jose Mxxxxyo – Elxxe Air Company

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 15

Pax Stopped at LAX by NZ

All parties are presumed innocent until found guilty in a court of law.

Pax paid NZ at LAX $4,500 to travel LAX-AKL-WLG.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 16

Investigation Leads

• Name and credit card searches via LEWS identified other agencies that dealt with Mxxxxyo

All parties are presumed innocent until found guilty in a court of law.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 17

David Gxxl

• AKA Davis Jerome Moxxxr• American living in Northern Italy (next slide)

• Signs up as an outside sales agent with host agencies in the U.S.• Uses compromised credit cards to issue tickets remotely• Tickets for students to travel intra-Europe or between US

and Europe

• Website: centuryxxxxxxworld.com• Promised free airline tickets for 700 U.S. college

students to help campaign for Obama

All parties are presumed innocent until found guilty in a court of law.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 18

American Residing in Italy

All parties are presumed innocent until found guilty in a court of law.

David Gxxl

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 19

Outside Sales Agent

• Identified 7 victim travel agencies via pax name and credit card searches:

• Advantage Travel & Incentives 24520322• 93 tickets = $167,422

• Priority Travel Services 24547471• 43 tickets = $17,820

• A Small World Travel 52647836• 50 tickets = $39,384

• Passageways Travel Service 2373566• 14 tickets = $14,037

All parties are presumed innocent until found guilty in a court of law.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 20

All parties are presumed innocent until found guilty in a court of law.

• Identified 7 victim travel agencies via pax names and credit card searches (continued)

• Dan Howell Travel 36631825• 63 tickets = $99,439

• Iobst Travel Service 39710020• 76 tickets = $175,902

• USA Gateway 45668571• 6 tickets = $5,512

• Totals: 345 = $519,516

Outside Sales Agent

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 21

Further Details

• “Phishing” schemes to gain passwords and system log-ins

• Owners/managers locked out of GDS’s• Often occurs over the weekend

• Contacted law enforcement in Minnesota and Colorado to pursue this case, but…

All parties are presumed innocent until found guilty in a court of law.

04/21/23ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. 22

What is being done about this…??

• By ARC…• Numerous messages to travel agents• Encourage Host agents to sign up only VTC agents

• By Carriers…• Monitor the GDS activity of known offenders• Debit memos can send a strong message to Host

agents• Intercept passengers for interview – just a “friendly”

chat

All parties are presumed innocent until found guilty in a court of law.