Go Back  FlyerTalk Forums > Miles&Points > Credit, Debit and Prepaid Card Programs > Manufactured Spending
Reload this Page >

Ladue man used online ticketing glitch to scam American Airlines out of $160K

Ladue man used online ticketing glitch to scam American Airlines out of $160K

Old Sep 11, 20, 10:10 am
  #1  
Original Poster
 
Join Date: Apr 2014
Posts: 248
Ladue man used online ticketing glitch to scam American Airlines out of $160K

https://www.stltoday.com/news/local/...55afb20eb.html

Whoa I wouldve thought of what he did as a clever way to MS a CC, by purchasing AA gcs then booking flight with it then on cancellation getting the refund to his original CC rather than the GC.

Stealing 20k from his family/friends was bad but with AA the article depicts as if he directly stole 160k rather than having spent that amount upfront in another form then getting refunded. Got prosecuted for this and ordered to repay 180k when AA"s maximum sustained loss was probably the credit card processing fees on his GC purchases.
njdealguy is offline  
Old Sep 11, 20, 10:37 am
  #2  
 
Join Date: Jan 2010
Programs: Hilton Diamond, Marriott/SPG Platinum
Posts: 458
it seems the flights weren't cancelled, he just use the system glitch to get refunded, so he got the tickets for free and sold the tickets to customers/friends at the original prices. no loss to his customers and friends.
coolguy100 is offline  
Old Sep 11, 20, 10:46 am
  #3  
A FlyerTalk Posting Legend
 
Join Date: Aug 2010
Location: DCA
Programs: UA US CO AA DL FL
Posts: 48,068
FT is full of threads in which people respond laughingly to the notion that anybody would be prosecuted for these sorts of fraud. They are usually correct, but not always.

I would not read too much into who lost what here. The fact is that this is fraud and this guy is now a convicted felon even if he isn't likely to wind up in prison.
LoungeLizardHugo and hi55us like this.
Often1 is offline  
Old Sep 11, 20, 11:04 am
  #4  
FlyerTalk Evangelist
 
Join Date: Nov 1999
Posts: 23,171
I dont get it. "Either before or after a flight, Schwarze would apply for a refund and then get that money refunded to his credit card, Goldsmith said. The money should have been refunded to gift cards that were nonrefundable, he said. American Airlines has since modified its systems to prevent the same thing from happening again" In the past week I used a GC for 2 purchases at 2 1 B&M store and another Online. Both times the items were returned and my GC was credited, is it only AA that wasnt able to refund a GC?

That said if a tkt was used at all for the 1st flight then it shouldnt hav erefunded anything and many times I used a different CC when gettinga refund so I ende dup with the pts from CC1 but lost pts on CC2 where the refund went to So if he used GCs for say $10K taht meant he had to pay 10K for those GCs then it was refunded say to CC2 he then took that $$ and paid off CC1 that was used his end resuly was charging 10K and being refunded 10K Was there a glitch wioth AA where they didnt CX the tkts so he was able someway to use or sell them?
craz is offline  
Old Sep 11, 20, 11:13 am
  #5  
FlyerTalk Evangelist
 
Join Date: Mar 2002
Location: Berlin, SW Florida, and Toronto
Programs: UA 1K, Hilton Diamond, Discovery Black, and assorted others
Posts: 27,746
I'm being a bit slow again. Regardless of where the ticket was refunded to (GC or CC), how does the ticket not get cancelled if a refund is processed?

He buys a GC with his CC for $100 and charges his client $100 and gets paid back. Uses the $100 GC to buy a $100 air ticket. So he is clear and his client has paid $100 for a ticket in his name. So far so good. He calls the airline (before/after?) and asks for a refund. The glitch allows him to receive $100 to his CC but leaves the flight untouched? That's more than a glitch, that's a huge flaw in the system.
LondonElite is offline  
Old Sep 11, 20, 11:28 am
  #6  
FlyerTalk Evangelist
 
Join Date: Nov 1999
Posts: 23,171
Originally Posted by LondonElite View Post
I'm being a bit slow again. Regardless of where the ticket was refunded to (GC or CC), how does the ticket not get cancelled if a refund is processed?

He buys a GC with his CC for $100 and charges his client $100 and gets paid back. Uses the $100 GC to buy a $100 air ticket. So he is clear and his client has paid $100 for a ticket in his name. So far so good. He calls the airline (before/after?) and asks for a refund. The glitch allows him to receive $100 to his CC but leaves the flight untouched? That's more than a glitch, that's a huge flaw in the system.
thats exactly what threw me, but as I posted Ive ordered online , the items werent were they said they were I called up and the csr gave me a Full refund to the GC I used and told me to give away the items, and the next day my GC had the $$ back on it, samething happened with Walmart at their store. So Refunds can be made back onto a GC, So somehow AAs system was lacking, hard to believe AA issued a refund w/o KOing the tkt
craz is offline  
Old Sep 11, 20, 7:39 pm
  #7  
 
Join Date: May 2002
Location: Arizona
Posts: 4,771
Forgive me but I am confused

Last edited by Centurion; Sep 11, 20 at 8:08 pm
Centurion is offline  
Old Sep 11, 20, 8:23 pm
  #8  
 
Join Date: Jul 2014
Posts: 305
Originally Posted by craz View Post
thats exactly what threw me, but as I posted Ive ordered online , the items werent were they said they were I called up and the csr gave me a Full refund to the GC I used and told me to give away the items, and the next day my GC had the $$ back on it, samething happened with Walmart at their store. So Refunds can be made back onto a GC, So somehow AAs system was lacking, hard to believe AA issued a refund w/o KOing the tkt
This has happened to me with Under Armour before. I bought a GC, used it, returned the items when they didn't suit me, and the money somehow ended up on my credit card used to purchase the card rather than the GC. I didn't question it but was relieved as I'd long thrown the GC out.
James91 is offline  
Old Sep 11, 20, 9:16 pm
  #9  
soy
 
Join Date: Dec 2008
Location: DUB-BOS
Programs: various
Posts: 2,790
Originally Posted by craz View Post
hard to believe AA issued a refund w/o KOing the tkt
Exactly. Ignoring what form the refund takes, cc or gc - the crazy part is AA issue the refund without cancelling the ticket. Afterall Walmart or the other examples given, do not issue the refund until they have the goods back in their possession.
Likely crap process on AA's part. Just like the fiasco they were running where (until a year or so ago), with paper vouchers issued for cancellations etc. To redeem you had to call to book the flights and then mail in the voucher....and it could take them another 6-8wks to process the thing. What a sub-par company, indicative of poor management
soy is offline  
Old Sep 12, 20, 5:29 am
  #10  
 
Join Date: Aug 2015
Location: YYJ
Posts: 96
Once again greediness made the crook in. Had he only used the bug a couple of times per year he might have gotten away with it but 180K in a few of years? Too much to go unnoticed for too long and to let it slide.
pauq is offline  
Old Sep 12, 20, 7:53 am
  #11  
 
Join Date: Oct 2013
Posts: 1,267
Can someone post link to original article that's not behind a paywall (assuming that's not fraud, too)?
tuphat is offline  
Old Sep 12, 20, 8:20 am
  #12  
 
Join Date: Mar 2005
Programs: Continental Onepass, Hilton, Marriott, USAir and now UA
Posts: 4,367
Originally Posted by tuphat View Post
Can someone post link to original article that's not behind a paywall (assuming that's not fraud, too)?
If you click on the original link and turn off your ad-blocker, you can read the article for free .............if you really want to

From the article

"In reality, Schwarze was exploiting a glitch in Americanís computer systems. From January 2016 through October 2018, Schwarze bought gift cards online using his personal credit cards, then used those gift cards to buy airline tickets for family, friends and associates to travel across the globe, Assistant U.S. Attorney Hal Goldsmith said in court.Either before or after a flight, Schwarze would apply for a refund and then get that money refunded to his credit card, Goldsmith said. The money should have been refunded to gift cards that were nonrefundable, he said."

It appears that everyone was correct. He bought tickets using GCs, then cancelled the ticket or applied for a refund (perhaps without cancelling the ticket initially) and got the refund on the CC, not the used GC. However, it appears that the tickets were not cancelled. (This is my speculation).
radonc1 is online now  
Old Sep 12, 20, 1:43 pm
  #13  
ogg
 
Join Date: Sep 2019
Posts: 222
The news story linked above gives a confused recounting of what happened. You can find the real details in the plea agreement here:
https://loyaltylobby.com/2020/09/09/...icketing-scam/
My guess is that after using the virtual gift cards he bought for airline tickets, he asked for a refund of his virtual gift card purchase--and AA simply reversed the order and credited the credit cards he had used to buy the virtual gift cards. In other words, AA never checked to see if the gift cards had been used or not when it refunded the purchase price.
ogg is offline  
Old Sep 12, 20, 4:36 pm
  #14  
A FlyerTalk Posting Legend
 
Join Date: Aug 2010
Location: DCA
Programs: UA US CO AA DL FL
Posts: 48,068
In any event, the charge was wire fraud and the facts here demonstrate just how broad a reach fraud does have.
SPN Lifer likes this.
Often1 is offline  
Old Sep 12, 20, 5:28 pm
  #15  
 
Join Date: Oct 2013
Posts: 1,267
@ogg: Thanks for the link.

I think the below-copied portion of the USA Information filing provides the clearest picture of the primary charge, which was: Buy AA Gift Cards using CCs. Use AA GCs to purchase tickets. Sell tix to friends/family. After tix were used (usually), go to AA Refund site and enter GC MSR instead of ticket number. Glitch in system would refund the tix value directly to the CC used to purchase the GC, apparently disregarding fact that tix had been used.

8. It was apart of the scheme that, on one and more occasions, SCHWARZE logged into the AA website, entered the AA Gift Card portal on that website, and purchased virtual AA Gift Cards using one of several credit cards to make the purchases. For example, as part of the scheme, during 2018 SCHWARZE purchased 690 virtual AA Gift Cards, in varied amounts ranging from $50 to $150, using his credit cards. It was a further part of the scheme that, after receiving the unique identifying number for each purchased AA virtual Gift Card, known as a miscellaneous sales receipt, or "MSR," SCHWARZE redeemed the virtual AA Gift Cards for AA airline tickets for travel for himself, his family members, or his friends and associates.

9. It was a further part of the scheme that, on one and more occasions, either before or after the actual flights were taken, SCHWARZE logged into the AA website, entered the AA Refund portal, and applied for a refund of the AA airline tickets which he had purchased with the virtual AA Gift Cards. Unbeknownst to AA, and as part of the scheme, SCHWARZE took advantage of a vulnerability in the AA refund system by entering the Gift Card MSR into the AA Refund portal, instead of the requested actual ticket identification number, causing the AA refund system to automatically refund the price of the airline ticket, minus any fees, directly to the credit card which SCHWARZEhad originally used to purchase the virtual AA Gift Card. Through his scheme, SCHWARZE, or his family members, friends and associates, used the AA airline tickets purchased by SCHWARZE with AA virtual Gift Cards for their actual flights, but the cost of those flights was refunded to SCHWARZE by AA through a credit to SCHWARZE's credit cards. SCHWARZE received approximately $160,340.00 in refunds from AA for airline flights that he, or his family members, friends and associates actually took
SPN Lifer likes this.
tuphat is offline  

Thread Tools
Search this Thread
Search Engine: