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Saturday, August 11, 2012 - Page updated at 05:00 p.m.

Brothers sentenced to 2 years in scheme to defraud Nordstrom

By Melissa Allison
Seattle Times business reporter

Two brothers were sentenced to two years in prison for wire fraud Friday in connection with their scheme to defraud Nordstrom of more than $1.4 million, the U.S. Attorney's Office in Seattle said.

Judge Ricardo Martinez of U.S. District Court in Seattle handed down the sentence to Andrew S. Chiu, 29, of Anaheim, Calif., and Allen J. Chiu, 37, of Dallas. They had pleaded guilty in April.

More than $970,000 in assets seized from the brothers by the U.S. Attorney's Office will be applied toward the restitution owed to Nordstrom.

According to filings in the case, Nordstrom canceled the Chiu brothers' online-shopping privileges in 2008 after the retailer said they made excessive claims for refunds on products that were purportedly lost or not delivered.

But the brothers continued shopping at Nordstrom.com.

They belonged to FatWallet.com, which generates online sales for retailers through coupons and cashback incentives. FatWallet paid cashback rewards to the Chiu brothers for purchases at various online retailers, including Nordstrom.com.

In January 2010, the brothers found a way to exploit a weakness in Nordstrom's ordering system. Although no merchandise shipped and their credit cards were not charged, the brothers received cashback credit from FatWallet, and Nordstrom unknowingly continued to compensate FatWallet for the orders.

From January 2010 through October 2011, the brothers submitted about $23 million in blocked purchases to Nordstrom.com and received more than $650,000 in undeserved cashback payments — costing Nordstrom about $1.4 million in commission payments and fees, the filings say.

Nordstrom's ordering system has been fixed.

The case was investigated by the FBI and prosecuted by Assistant U.S. Attorneys Katheryn Kim Frierson and Francis Franze-Nakamura.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com. On Twitter @AllisonSeattle.

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