Gonzalez Pleads Not Guilty To New Jersey Charges

Written by Evan Schuman
October 15th, 2009

Albert Gonzalez, the man who U.S. federal authorities have accused of masterminding the cyber attacks of more than a dozen of the nation’s largest retail chains, pled not guilty Tuesday (Oct. 13) to charges from a New Jersey retail breach indictment.

Gonzalez was whisked from his federal prison cell at the Central Falls Detection Center in Rhode Island to face U.S. District Court Judge Jerome Simandle in Camden, New Jersey. (Yes, I know. “He was forced to spend hours in Camden. Hasn’t the man been punished enough?” Hey, I’ll make the New Jersey jokes around here. At least he was spared a trip to the federal courthouse in Newark. When you’re indicted in Jersey, you count your blessings.)

Having had just about all of his money confiscated by the feds, Gonzalez could no longer pay his attorney and was assigned a federal public defender, Christopher O’Malley, who said he was only told of the case the day of the plea. Judge Simandle set pretrial motions due from Gonzalez on December 11, with the government’s reply due January 8, 2010. A trial date has been scheduled for January 25, 2010.

As a practical matter, though, it’s highly unlikely that this case will ever get to trial. First, there are quite a few major retailers named as victims in the New Jersey case—including Hannaford and 7-Eleven, along with processor Heartland—in addition to at least two more major retail chains that the feds have yet to publicly identify. (StorefrontBacktalk has identified one of the unidentified New Jersey chains as J.C. Penney and Target as one of the unidentified chains in the Boston indictment, based on information from officials involved in those cases.)

Both chains would really rather not have to testify, a concern shared by federal officials, who would prefer to have as few of their investigative techniques as possible discussed publicly.

Gonzalez himself has already pled guilty to similar charges in New York and Boston and he was in extensive plea negotiations with Newark, which seems to indicate a willingness to consider pleading guilty. Indeed, with the years of prison already awaiting him in connection with the Boston and New York guilty pleas, it’s unclear how much more punishment federal officials truly think they could get by forcing the New Jersey case to go to trial.

With both sides having a strong incentive to settle this case, it’s quite unlikely it will get to trial. Then again, with Gonzalez’s day-to-day existence now consisting of being in federal prison, a lengthy courtroom trial might prove a welcome diversion, and there’s always the chance of a jury acquittal. Either way, we’ll be tracking this case closely.


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Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

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