DALLAS (CN) – Two brothers will serve two years in federal prison for scamming Nordstrom out of $1.4 million in online cash-back payments.
Allen J. Chiu, 37, of Dallas, and Andrew S. Chiu, 29, of Anaheim, Calif., were sentenced by U.S. District Judge Ricardo Martinez in Seattle.
The Chiu brothers pleadedguilty in April to wire fraud. They faced up to 20 years and $250,000 fines.
Prosecutors agreed to recommend two years in prison under a plea agreement in place, according to a joint sentencing memorandum.
Both men were long-time members of FatWallet.com, a shopping website that uses cash-back incentives for members to promote online retailers.
Prosecutors say the brothers discovered in January 2010 that they could exploit a Nordstrom computer error in which the retailer would unwittingly pay FatWallet for blocked orders. FatWallet allegedly gave the brothers cash-back credit, though their credit cards were never charged for the $23 million in fraudulent orders.
“Although no goods were ever shipped and no charges were ever incurred by the Chius, Nordstrom nevertheless paid out more than $1.4 million in commission payments and fees as a result of the Chius’ fraudulent orders,” prosecutors said in the sentencing memorandum.
“The brothers then extracted over $600,000 in cash back awards from FatWallet before the companies finally realized what was happening and stopped all further payments.”
When FatWallet caught on and stopped issuing cash-back payments, the brothers tried to circumvent the blocks by submitting Nordstrom.com orders through another shopping website that offered cash back, according to the sentencing memorandum.
“The scheme failed only because the alternate website was affiliated with FatWallet, and the company was able to recognize the Chius,” prosecutors said in the memo. “The Chiu brothers finally ceased their ordering activity when it became clear law enforcement were investigating their actions.”