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From: Daily Progess, Charlottesville, VA

Authorities on Wednesday traced the downfall of a Charlottesville-based fraud ring that sold about $3 million worth of fake driver's licenses to 25,000 college students to a clumsy coed in Charleston, S.C.

Had she not dropped an open envelope containing five Ohio driver's licenses on her way out of a Charleston post office last spring, Novel Design might still be churning out IDs on from a Rugby Road home, U.S. Attorney Tim Heaphy said.

The three codefendants charged in the case all quietly accepted responsibility for their roles in the operation Wednesday before U.S. District Judge Norman K. Moon in Charlottesville.

Alan McNeil Jones and Kelly McPhee, both 31, and Mark Bernardo, 27, each pleaded guilty to one count of conspiracy to commit document fraud and aggravated identity theft. The three former roommates did not acknowledge one another during the half-hour hearing.

All remained dry-eyed until McPhee broke down when her family waved to her as she exited the courtroom. Bernardo and McPhee signed plea agreements. Jones’ plea was not a part of an agreement, according to his attorney, David Heilberg.

"He was the mastermind, the leader of this enterprise," Heaphy said of Jones.

Jones dabbled in identity fraud to dodge the financial woes that dogged him when he followed McPhee, his girlfriend at the time, from Alabama to Charlottesville, Heaphy said.

Heaphy said Jones used genealogical information to select his targets and used that data to open lines of credit, secure employment and sign leases - including a rental agreement for the $1.3 million Rugby Road property that would serve as a home and ground zero for the operation.

Jones deployed several forms of identification to become any of the half-dozen people he masqueraded as in Virginia, Heaphy said. 

"He started this strictly for himself," Heaphy said. It became "a very sophisticated and very lucrative business."

The business was born in line at a Corner bar in 2010, when Jones watched security turn away an underage University of Virginia student trying to gain entry with a fake ID, according to court records. Jones told the student he could do better, Heaphy said. Jones did. Soon, word of mouth spread interest in Novel Design to customers across the state and around the country, court records state.

Heaphy said buyers would email Jones with their information, and then mail $75 to $125 in cash to a Charlottesville post office box.

"There was no website, there were no cards, there was nothing, other than that person to person word of mouth," Heaphy said. "In contrast to the sophistication of the manufacturing, he was not very sophisticated in terms of how the payment was made."

Earlier attempts to wire funds fizzled out as business boomed, Heaphy said. McPhee began to help process photos, perform data entry and fetch and send out orders to keep pace with demand, court records state.

"Jones' process improved with time," Heaphy said.  "It started with Virginia driver's licenses and eventually he was able to make 17 separate state fake driver's licenses. He was able to obtain tremendous amounts of money."

Heaphy said as the operation mushroomed, Jones sought out Bernardo for technical support and asked him to join the team in the summer of 2012. Bernardo was working with an unnamed fourth person to develop a website to streamline processing at the time the trio was arrested, according to court records.

Police received the envelope stuffed with fake Ohio driver's licenses a few months before Bernardo came into the fold, court records state. Heaphy said investigators learned the IDs came from Charlottesville and set up surveillance to find the owner of the post office box.

That five-month stakeout led law enforcement to Rugby Road. State police carrying assault rifles and wearing tactical gear swarmed the home May 6 in a late-night raid that netted guns, cash and ID-making equipment, according to court records.

Police arrested McPhee and Bernardo that night and tracked Jones down the next day at a nearby shopping center.

All three signed an order agreeing to forfeit more than $2 million and cars, phones and other electronics purchased with proceeds from the business, according to court records.

Authorities are comparing names contained on seized computers from the house against national databases but have not tied any of the fake IDs to terrorist activity, Heaphy said

"Their intention we believe was to sell to college students, but there is no way of knowing exactly where those identifications went," he said.

The three are scheduled for sentencing on Dec. 16.  Each defendant faces a mandatory minimum prison term of two years for aggravated identity theft and up to 15 years in prison for conspiracy. The charges carry a maximum combined fine of $500,000.

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