Our next story comes from the 'Holy Shit That's a Lot of Fancy Shoes' department ... The U.S. Attorney's Office and the FBI announced yesterday that brothers Andrew S. Chiu, of Anaheim, Calif., and Allen J. Chiu, of Dallas, Texas. pleaded guilty to wire fraud- part of a scheme that aimed to swindle more than $1.4 million from Nordstrom in commission and rebates. The ruse utilized the online shopping site Fat Wallet Inc. and what's described as a computer programming error in Nordstrom's ordering system.
According to a U.S. Attorney's Office press release, the Chiu brothers were banned in 2008 from ordering from the Nordstrom website because of, "excessive claims for refunds based on representations that merchandise had never been delivered." While that was obviously an effort to stop the Chiu brothers from taking advantage of Nordstrom, officials say it ended up having the opposite effect. Despite being barred, both brothers continued to attempt to place orders, which apparently led to the light-bulb moment related to their membership with Fat Wallet Inc.
As the U.S. Attorney's Office press release details:
Both men belong to FatWallet Inc., a membership-based shopping community website that promotes various online retailers by providing coupons and cash back incentives for purchases. FatWallet paid cash back rewards to the Chiu brothers for purchases made at various online retailers, including Nordstrom.com. In January 2010, the brothers discovered they could exploit a computer programming error in Nordstrom's ordering system by placing orders that would ultimately be blocked by Nordstrom. No merchandise would ship and nothing would be charged to their credit card. However, Nordstrom would unknowingly continue to compensate FatWallet for the order, and the brothers would still receive the cash back credit from FatWallet. Between January 2010 and continuing through October 2011, the Chiu brothers collectively placed more than $23 million in fraudulent orders through Nordstrom.com. The fraudulent ordering resulted in Nordstrom paying $1.4 million in rebates and commissions, with more than $650,000 in fraudulent cash back payments going directly to the brothers.
While jeans are expensive these days, consider for a moment just how much merchandise must have been ordered to tally $23 million. It's fairly mindboggling.
And for all the entrepreneurs out there, the DOJ press release makes sure to note that the error in Nordstrom's ordering system that the Chiu brothers exploited has since been fixed.
U.S. District Judge Ricardo S. Martinez is scheduled to sentence the Chiu brothers July 13, with prosecutors planning to recommend a sentence between 24-30 months based on terms of the plea deal. However, Judge Martinez is not bound by these recommendations and can impose a maximum sentence of 20 years in prison and a $250,000 fine.
For those playing at home, $250,000 is only, like, 1,250 pairs of expensive shoes.
Peruse charging documents from the case below: