How USPS OIG Data Analytics Helped Pinpoint a $2.3M Fraud

It began with an unintended discovery: A man in southern California filed an indemnity claim with the Postal Service after he sent a Priority Mail parcel that was never delivered. He declared, by mistake, the value lost was $100 when it was actually $5.

When the Postal Service reimbursed him without question, a lightbulb went off in his head and thus ensued a $2.3 million indemnity fraud scheme. The Postal Service didn’t detect the fraud — how was it our special agents cracked the case?

“To protect the integrity of USPS’s postal insurance program, we will investigate and hold accountable any individual who abuses it. This investigation is testament to our core value of innovation — our in-house data analytics tools allowed our investigators to swiftly identify such a significant fraud on the Postal Service and bring its perpetrators to justice.”

– Tammy Hull
Inspector General, U.S. Postal Service

When it comes to financial fraud, criminals leave a rat’s nest of information behind to avoid detection. Imagine if you wanted to defraud a courier by filing multiple claims using your name and address — immediate flags would go up on the courier’s end. This is similar to what we’re seeing in the retail industry, where online companies are flagging and denying claims when a given customer makes too many returns.

Fraudsters use a series of techniques to obfuscate any personal identifying information to send investigators searching for a needle in a haystack. But our Financial Fraud investigators are highly trained, and their efforts are bolstered by state-of-the-art data analytics tools developed in house. The tools led our special agents to suspicious transactions and their subsequent investigation revealed the perpetrator and a co-conspirator — his brother.

The two pocketed over $2.3 million after submitting almost 18,000 Priority Mail insurance claims to the Postal Service. They mailed low-value items or simply empty packages and reported them as damaged or lost. They also backed their claims with fictitious invoices and fraudulent images of the contents and the Postal Service, in good faith, paid up to $100 per claim plus shipping costs.

Investigators tracked down three properties associated with the brothers and executed search warrants. There, local tactical teams found about $100,000 in cash, $100,000 in jewelry, and over 60 firearms (pictured) that became part of the asset forfeiture. They also found about 155 pieces of mail containing USPS claims remittance checks and over 100 empty claims remittance check envelopes.

The brothers were arrested and charged, and in February 2024, they pleaded guilty to mail fraud. And in November, they each were sentenced to more than two years in prison and ordered to pay over $2.1 million in restitution to the Postal Service.

If you suspect or know of indemnity or other financial fraud involving the Postal Service, please report it to our Hotline.

For further reading:

Department of Justice (via uspsoig.gov), Two Riverside County Brothers Sentenced to Prison for $2.1 Million Mail Insurance Scam that Defrauded United States Postal Service