Brazilian Family Under Investigation Over $17 Million in Manufactured Spend

Reader Denis passes along this story (Portugese) about a family under criminal investigation over manufactured spend.

It’s not clear from the article how laws would have been broken. Google translates the charges as,

Gang, embezzlement, forgery, use of false documents and money laundering.

Apparently they earn only about $740 per month but managed to generate ~ $17 million in credit card charges last year.

Denis explains that “he used a form of wire transfer known in Brazil simply as “DOC”, which is the way most bills (utilities, credit cards, cable….) are paid, but he issued those DOCs to himself or someone else in his family.”

Those funds transfers generally come with a fee, ~ 2.5%, so it’s unclear from the story how he managed to keep his costs low enough to make the credit card rewards worthwhile.

It was the scale of the transactions that tipped off authorities:

What caught the attention of the authorities was totally distant financial transactions of the economic capacity of these people,” says the chief Flavio Porto.

Sort of like an American Express financial review. Only in this case, the authorities aren’t asking for tax returns, they are investigating criminal charges.

What’s really criminal, though, is how tough it can be to use miles in Brazil.


About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. This family seems, more and more, to have been used as a scapegoat…

    A family of 15 people having 30 credit cards does not seem absurd. The tone of the news claiming that early in the morning when Police (and TVs) blasted their home and they were in PJs, seems excessive.

    $17 million may seem much, but over 15 people and, eventually, five years – the time IRS collects info – really downsizes the whole scheme of things.

    While the guy makes $740/month we are not informed how much the whole family makes, though. Biased in my opinion.

  2. @PB: I am Brazilian so I can help you understand what happened in this case. The guy is an IT analyst and he makes around $700/month. he had a scheme to pay bills with credit cards where the payee and the company receiving the payment were the same person (himself or a family member). The article is not clear on how he used the credit cards to pay all these bills. However, in 1 year he paid the equivalent of $17M using credit cards which gave him points/miles. His big mistake was to post all his amazing trips with his entire family on his Facebook account. He and his family traveled the world flying first class and stayed in amazing hotels which called the attention of someone that tipped the police to investigate.

    Thus, this did not happen over 5 years but all in just 1 year. Even you read these blogs and you sign up for dozens of credit cards there is no way someone that makes $700/month can spend $17MM in one year. Also, he was selling miles to travel agencies which I believe is not allowed. In sum, the guy is in deep trouble. He will for sure keep all his memories from his amazing trips but his memory may become a little blurry after spending many years behind the bars in a Brazilian jail. 🙂

  3. If you’re laundering $17 million with the idea that you’ll pass it off as you were just trying to MS for frequent flyer miles…well…c’mon. Doesn’t pass the smell test. Not on a reported income of $740 a month. To law enforcement — and TBH to me, even though I’m in the hobby — it seems far more likely that he committed fraud somewhere. It looks like he probably has a lot of unreported income. But he could be committing some kind of rebate fraud or lying about his income to get excessive amounts of credit or another similar fraud. But it’s hard to think of an entirely innocent explanation for this amount of spend.

    It’s going to be a hard sell to a jury. Hope they budgeted for an amazing legal team.

  4. Reading the article one more time this is what he was doing. In Brazil you apparently can pay invoices using a credit card. He would create fake invoices issued by a fake company that he or a family member were supposedly the owner. he made it look like that he purchased something from that company and he was invoiced by the company to pay for the purchase. he would use a credit card to pay for the invoice which would generate miles in his name. However, the credit card company was paying “him” back since the company was his. In sum, all his transactions were fake and it was just a way to have money moving through his credit card to generate miles. What I don’t get it is how he was able to pay $17MM using his credit card limit and the credit card companies never raised a red flag over it. BTW, in Brazil you don’t get credit cards easily like in the US. It is usually issued by a Brazilian bank using the Amex brand or Visa/Mastercard under AA, TAM, etc… I watched the vide on the TV 2 weeks ago and he had quite a “business” inside his house with tons of credit cards, printers to print fake invoices, etc.. The cops got everything since he was not prepared to get caught. He had everything documented in his computer and he is now in big trouble. Amazingly he already found a lawyer that came to the public and said he will prove that everything his client did was legal and there was nothing wrong on his transactions. LOL!!!!

  5. People should stop assuming that they know jack about other countries work. And just because you don’t know how things work, just assume that they work like in the US.
    In Brazil you don’t need a company to issue invoices (called “boletos”), any person can do it and they are payable by credit card. You can do it to pay for your baby-sitter, or just to transfer money to a family member.
    Most banks now charge significant fees to pay them by credit card though (in the beginning they were all free), but when you are justing moving the same money (minus the fees) around it’s probably worth it. Basically this is what this guy did, and on top of that he sold some of the miles that he gathered this way.
    Put it this way, this is basically an Amazon Payments without limits and the guy used a very large network of family members to move money around.
    I’m assuming that this is fraud because the boleto system has rules against issuing invoices for non-existent/virtual transactions.

    In fact there is a famous points-and-miles Brazilian blogger (who comments often on Boarding Area blogs) that collects mile by using this system to pay each credit with another credit card; rinse-and-repeat each month. Since these are real payments he never got in trouble; so far at least, but maybe he’ll be more careful now.

  6. @Miguel: Whatever way this guy did it was illegal. And like many stupid people nowadays they cannot just do something illegal and be quiet. They need to show off on Facebook. You can say you can pay “boletos” or use it as Amazon Payments but $17MM in one year? Can you tell me how even involving 15 people of his family he was able to get that much credit from his credits cards and no bank had an issue with that? Unfortunately knowing the way things work in Brazil he won’t go to jail but I bet you it will be a long time until he travels again. 🙂

  7. @Kris
    Anyone who sistematically deposit/withdraws, ELECTRONICALLY, amounts of money easily sum up millions, just give them time and patience.

    Banks, as long as both parties are clearly identified do not get even curious or suspicious as there cannot be money laundering between two identified natural persons, from the same family. At the end of day this is what that guy had been doing – all electronically, fully traceable.

    @Santastico,
    The TV footage is clearly biased and lacks relevant info. There are parts of it that show info from 2011, so it has not been only 12-months. I believe no serious report stalks a family during a mass service, and after having stated they would not comment any further.

    Regarding how much that particular guy makes each month, IMHO is absolutely irrelevant as we do not know whether the cards had been approved under his name, or someone else in the family. TV footage simply states the young guy had the idea…

    Your saying his doings are illegal is wrong as no one has all the info so far, not even the Police, who is investigating and assessing whether any felony may have been committed.

    Last but not least, in Brazilian legal terms a BOLETO is not an INVOICE. Legally terminology states that a BOLETO is a means to transfer money, period. While an INVOICE is a document used upon purchases and where taxes are due. Some companies disregard invoices and simply issue Boletos – if any paymnent is failed an invoice must be generated for collecting purposes.

    Again 17MM divided by 15 people and divided by 60 months in a country where you can pay the bill of a credit card with a different credit card, paying banking and govt taxes and keep – rinse & recycling in the same month, again and again and again – is not much. A simple cycle is 10k/each. If done three times it averages 3,000 USD in the credit card bill per month.

    Of couse saying that anyone spends 3,000 dollars makes no news – However summing up all the deposits/withdrawals makes the TV on a sunday evening.

    To commit a felony or a crime someone must have been fooled/harmed/wronged – and in this case all parties involved have received their due and paid in full – Banks, Government and Airlines FFP, either in fees, taxes or sales. All legal transactions, thus there will be a hard time to prove any crime has been committed during five years and no financial institution noticed anything – and several banks had to be in the loop.

  8. If true that none of his actions were actually illegal, you can bet that all companies involved will definitely close any loopholes that this news has exposed.

  9. @PB: If you are Brazilian you can read this article that tells more details about this fraud. By your comments above I don’t think you are up to date in all details.
    http://odia.ig.com.br/noticia/rio-de-janeiro/2014-08-04/policia-desmascara-familia-que-fraudava-milhas-aereas-para-viajar-pelo-mundo.html

    FYI, the guy spent BRL40MM (almost $18MM) in ONLY 1 YEAR!!!!! Where did you get “over 60 months”? They are being charged with the following crimes: racketeering, conspiracy, money laundering, forgery and use of false documents. That will get him 23 years in jail.

    If you still feel what he has done is legal you should probably hire him to help you get more miles. 🙂

  10. I think this sounds like a case of (possibly unjustified) tax evasion. Sounds like this guy an extensive network though so I would not be surprised if he really is doing something illegal. The good thing is, it sounds like he kept good records,(truthful?) so it should be pretty easy to verify his story. A side question should be, if he really was just engaged in extreme MS then why did the banks, airlines, payment facilitators just not shut him down??? (for one thing, he was SELLING MILES)

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