Mafia meets the home channel: Lowe’s, Home Depot allegedly victimized by phony bar code scheme, credit card theft

At first, the U.S. v. Merola et. al. sounds like an episode of “The Sopranos.” Stolen power tools being sold at a substantial discount. Wise guys shaking down lunch truck drivers at a construction site. An employee pocketing customers’ credit card numbers. But according to a grand jury indictment unsealed on May 8, all this and more took place in northern New Jersey during the past two years. The 30-count indictment, based on wiretaps, surveillance and confidential informants, covers the usual organized crime territory: illegal gambling, extortion, loan sharking, labor racketeering and fraud. But this time, according to federal prosecutors, La Cosa Nostra saw opportunity in the home improvement retail channel.

Two high-ranking members of the Gambino crime family were able to devise phony bar codes that fooled the UPC scanners of Home Depot, Lowe’s and other retailers in New Jersey, according to the FBI. Investigators also believe the mob planted an employee inside of a Lowe’s, where the employee helped steal customers’ identities. All this came to light on May 8, when the FBI began rounding up suspects, and the U.S. Attorney’s Office in Newark called a press conference.

The 85-page indictment lists a number of alleged crimes committed by the lead defendants and their associates; those involving home improvement retailers are only a single chapter in a sweeping investigation by federal, state and county investigators.

Bad credit

Andrew Merola is described in the indictment as “one of the Gambino crime family’s highest ranking members in New Jersey,” who ran his own crew. According to federal investigators, Merola and his associates operated an Internet-based gambling site, bribed union officials, forced lunch trucks vendors to pay kickbacks and accepted money for no-show jobs at construction sites.

Merola also recruited India Fugate, a 28-year-old Newark woman, to apply for a job at either a Home Depot or Lowe’s store. On Feb. 18, 2007, Fugate applied at a Lowe’s store. (It’s not clear whether she applied at Home Depot as well.) On March 19, Lowe’s hired Fugate as a customer service associate in Paterson, N.J. She worked at the checkout register, and part of her job was processing Lowe’s credit card applications. Investigators say it was her intention all along to steal customers’ identities.

According to the indictment, Fugate would print out additional copies of customers’ temporary Lowe’s credit cards after they had left the store. These cards were given to Merola, whose associates used them to fraudulently purchase merchandise, prosecutors allege. Fugate also fed Merola credit card applicants’ personal information, the indictment states. On at least one occasion, that information was allegedly transmitted by wire across state lines, it claims.

The indictment also outlines a bar code switching scheme that went on between March 2006 and May 2007. With assistance from Charles Muccigrosso, allegedly another high-ranking member of the Gambino family, bar codes for low-cost items were duplicated and then affixed to similar, but more expensive items, investigators claim. Merola and Muccigrosso, who also went by the name of “Buddy Musk,” would direct their crew to buy the expensive items at a substantial discount and then sell them on the street or return them to Lowe’s (minus the bar code) for a gift card or in-store credit.

For example, a $549.99 Dyson vacuum was purchased from Lowe’s using the bar code for a $49.97 Euro-Pro vacuum, according to the indictment. Other items fraudulently purchased from Lowe’s include a $374 chain saw for $44.97 and two $669 welding machines for $39.98 and $58.

Not just Lowe’s

In a press release summarizing the charges, the U.S. Attorney’s Office and the FBI also allege that Merola, Fugate and others successfully tried the bar code scheme on Home Depot, Circuit City, Best Buy “and other stores in New Jersey.” But nowhere in the 85-page indictment are the other retailers mentioned. When contacted by Home Channel News, Michael Drewniak, a spokesman for the U.S. Attorney’s Office in Newark, said he could not explain the discrepancy or comment on the case.

Ron DeFeo, a spokesman for Home Depot, said the retailer “fully cooperated with the federal authorities on their investigation.”

Lowe’s sent two “stop loss” specialists to the May 8 press conference in Newark. Company spokeswoman Chris Ahearn said the company “was pleased we were able to support the FBI in its investigation.”

Sean Quinn, a spokes man for the FBI, told Home Channel News that Fugate turned herself in to county authorities on May 9. Unlike many of the other defendants in the case, Fugate has not been charged with racketeering. She is charged with two counts of conspiracy to commit wire fraud.

Neither Fugate nor her attorney could be reached for comment.