MoneyGram deal settles fraud charges

MoneyGram International Inc. said Friday it had agreed to set up a $100 million compensation fund as part of a settlement of government allegations of fraud through money-transfer scams from 2003 to 2009.

Under terms of the deal with the U.S. Attorney's Office for the Middle District of Pennsylvania and the Department of Justice, MoneyGram said it had also taken other steps to prevent more scams. These include adding more investigators and beefing up technology to detect fraud, which has often involved international mailings and money transfers that drew attention from the U.S. Postal Inspection Service.

"We've been prosecuting cross-border fraud cases for about 12 years," said Nick Alicea, team leader for the Harrisburg postal inspectors' office, which worked with Canadian authorities on the MoneyGram investigation. MoneyGram, a payment services provider, said it had terminated relationships with the agents suspected of masterminding the fraud.

Prosecutors' court documents say victims of the fraud were promised they would receive lottery winnings, fictitious loans, and large cash prizes. The scheme also involved offering high-ticket items for sale over the Internet at deep discount and posting jobs for "secret shoppers."

Victims were then directed to send advanced payments to fake payees using MoneyGram, the government said. Prosecutors alleged MoneyGram agents knowingly entered false addresses and telephone numbers for these transactions into the company's database, then subtracted their own fees for their roles.

The company previously set aside the money to compensate victims.

"The conduct described in the [settlement agreement] is unacceptable to MoneyGram and counter to everything we strive to stand for," Pamela H. Patsley, chairman and chief executive officer, said in a statement.