ASHLAND, Ky. (AP) -- The head of a counterfeiting ring in eastern Kentucky is scheduled for arraignment on Sept. 10, a month after being arrested after an escape from federal custody.
U.S. Magistrate Judge Edward B. Atkins will conduct the hearing for 52-year-old Harold James in federal court in Ashland, Ky.
James was serving 41 months in federal prison for conspiracy to defraud the United States. James admitted to passing 108 phony checks to retailers, and that he manufactured more than 500 of the checks.
Eight other people were convicted in the scheme, which prosecutors say affected businesses in Boyd and Carter counties and in Lawrence County, Ohio, costing them roughly $65,000.
James escaped from a drug treatment center in Ashland, on May 10. U.S. Marshals caught James in Atlanta on Aug. 13.
As more people were sentenced Monday to prison, we examine the scope of an organized crime ring that used the addicted as pawns in a big dollar chess game.
Paige Clair and her estranged husband Ric admit they were low and mid-level soldiers in a criminal army operation investigators say usually happens in large metropolitan cities.
Prosecutors say, in 2009, organizers had at least 60 people involved in stealing payroll codes from fast food restaurants. Then, they printed counterfeit checks and had an army of recruits go to various businesses to cash and kickback.
The number of illegal checks passed locally totaled about $65,000.
A Secret Service agent testified that up to 500 counterfeit checks were admittedly passed here in the Tri-State. Plus, packages of hundreds more fake checks were mailed from Ashland to circulate in New Orleans, Houston and Atlanta.
The criminal recruiting fuel was that most of the low-level check cashers had less than a high school education and were heavily addicted.
U.S attorney’s say this is happening all over the United States. But here, prosecutors say -- in their words -- they're putting the bad guys in jail.
Federal prison sentences for the conspirators include:
Many in the organized crime scheme pleaded guilty or were sentenced in federal court Tuesday.
WSAZ.com has learned how this widespread payroll check fraud affected so many. There are likely still dozens of bogus payroll checks out there, circulating in West Virginia, Ohio and Kentucky.
WSAZ.com first reported two counterfeiting arrests back in June of 2009. That’s when the federal conspiracy probe took off. The players, all admitting guilt, now include bosses, recruits and a lot of bad paper and big money.
Admitted check cashing recruits George and Paige Clair, who are out on bond, would not talk. Their attorney wouldn't talk either. But, the lawyer for the conspiracy’s second in command, Larry "Cujo" Davis, did.
"It’s scary for the public, usually the thing that brings them down is greed," Richard Hughes said.
Prosecutors say in a short few months, back in 2009, these people either printed, distributed or cashed around $65,000 in bogus payroll checks.
So, how did it work?
Court records explain the reputed mastermind Harold James got stock blank checks and used computer printing to put payroll codes on them. The banking information was stolen from various fast food places.
Then, random lieutenants and captains, if you will, recruited people to cash the checks running from $400 to $800. The checks were cashed at different banks, liquor stores, grocery stores and several regional Wal-Mart locations.
"Then they would give the kick back money to the bosses. It did not take much to recruit people, they would find out, and come to them,” Hughes said.
Many of those recruited to cash the checks had two troubling things in common -- they told the judge they had an eighth or ninth grade education and were heavily addicted to pain pills or heroin.
"That runs through all of this. It's an easy way to get money; you don't have to risk shoplifting, just cash a check," Hughes said.
The feds found 108 checks cashed, but say hundreds more were printed, and may be anywhere in our three-state area or beyond.
The two leaders, Harold James and Larry Davis, were sentenced to three-and-a-half and two-and-a-half years in federal prison.
Six more recruits are set to be sentenced in January.
According to an Ashland Police press release, the checks were being produced and passed by Harold James and Larry Davis out of an apartment complex in the 2300 block of Winchester Avenue.
During a search of the apartment, officers found several thousand dollars, computer check writing equipment and drugs.
Another person, Shanta Jackson, was arrested on possession of marijuana charges.
All three people were taken to the Boyd County Detention Center.
Police say that they still have to account for some of the counterfeit/forged checks.
Anyone with information on these subjects is asked to contact the Ashland Police Department.