The case against Shahin Abdollahi, a.k.a. Sean Holdt, is that he supposedly used the systems he sold to Subways around the country to fraudulently load value onto giftcards. The indictment then claims that Abdollahi either used the giftcards himself at Subways thousands of miles away or sold them as discounted cards on eBay (NASDAQ:EBAY) and Craigslist. For that added touch of chutzpah, the indictment alleges, Abdollahi and a co-conspirator "sometimes registered [the giftcards] online with Subway" and that was done "to keep track of the fraudulently loaded cards in case of loss or theft." After all that work, you certainly wouldn't want a card to be lost due to carelessness.
The indictment said that Abdollahi owned "one or more" Subway franchises in Southern California from 2005 to 2008, where he would have learned extensively about Subway POS systems and the chain's giftcard mechanisms.
In March 2008, he then opened a California-based POS business called POS Doctor and sold POS systems to retailers. The indictment said that Abdollahi specifically marketed his systems to Subway franchisees—it was unclear if he sold any (or even tried to sell any) to any other retailers—and ran the POS business using the name Sean Holdt. He sold systems to "at least 13" Subway franchises nationally, including Massachusetts.
The name POS Doctor was an especially clever name for selling to Subway franchisees, as the goal was to make them comfortable that this was an accepted Subway package. The name was effective because Subway is owned by Doctor's Associates Inc.
"On many, if not all, of those POS systems, Abdollahi also installed remote access software," typically from Logmein, the indictment said. "Members of the conspiracy then used the compromised POS systems to make fraudulent loads onto Subway giftcards, typically in the early hours of the morning when the restaurants were closed. These loads totaled at least $40,000."
Note: The references to "at least $40,000" may be sharply understating the amounts supposedly taken, because indictments such as these typically allege the minimal amounts to satisfy statutory requirements. Why should they bother trying to prove more than they have to?
The timing of the fraudulent loads and the use of the cards in a far-away Subway was often quite tight. For example, the indictment said, on Feb. 22, 2012, one co-conspirator, Jeffrey Wilkinson, used a fraudulently loaded giftcard at an Alameda, Calif., Subway barely six hours after it had been loaded at a Subway in Wyoming.
Subway has been hit by cyberthieves leveraging remote access before, and Subway IT people pointed out then that the chain had discouraged franchisees from using less-expensive (and less secure) remote access packages. But owners will be owners.
Beyond normal bookkeeping and log maintenance procedures—and transactions happening when the store is closed for business should certainly be a red flag—this crime used trust to an impressive level. Whenever purchasing any sensitive equipment, such as POS systems, the retailer needs to trust the vendor to a certain degree. And who would seem more trustworthy to a Subway franchisee owner than someone who had also recently been a Subway franchisee owner?