<em>New York Times</em> Delivery Man Defrauds Company Out Of $227K With Fake Subscriptions

The Wall Street Journal's Law Blog reports on a $227,000 fraud scheme carried out against the New York Times.

A local newspaper distributor in La Crosse, Wisconin named Michael Holtet has been charged with one federal count of wire fraud for creating thousands of fake subscribers — all of whom curiously selected "Bill Me Later" — and running away with $0.55 per weekday paper and $1.10 per Sunday paper delivered to these fake subscribers.

From the Law Blog:

At the end of 2006, according to the complaint, the average number of daily home subscribers in La Crosse was 65 and the average number of Sunday Times subscribers was 103. However, starting around 2007, those numbers began to climb rapidly, and by the beginning of 2008, there was an average of approximately 2,781 daily subscribers and 2,818 Sunday subscribers. The complaint says that jump was due to Holtet, who, when all was said and done, had created about 8,500 fraudulent subscriptions.

While the blog does not spell out exactly how the scheme worked, it posts the PDF of the US Attorney's complaint, which lays out the following:

At the time of the events charged in the Complaint, individuals could subscribe for home delivery of the New York Times by registering through a website maintained by the NYT Company (the "Subscriber Website"). The Subscriber Website did not require a new subscriber to pay immediately for the subscription; instead, it allowed new subscribers to opt to be billed at a later date. If a new subscriber opted to be billed later, the NYT Company printed and mailed periodic invoices to the subscriber. Whether the new subscriber opted to pay immediately or to be billed later, delivery of the New York Times would start within a few days. The NYT Company, and not distributors like HOLTET, was responsible for collecting payment from all home delivery subscribers.

PDF of the complain embedded below via DocStoc (downloadable here):