A Medford banker has received a patent for a method to deter one form of check fraud — a plague that costs financial institutions billions and consumers untold headaches every year.

Brent Pearson, a commercial and consumer lender at People’s Bank of Commerce in Medford, was a vice president and retail sales manager for several Southern Oregon U.S. Bank offices a few years ago when he encountered and ultimately helped break up a check-fraud ring.

Thieves had committed millions of dollars worth of fraudulent transactions along the West Coast and had already hit Rogue Valley banks for around $20,000 Pearson says. While he was at an Ashland branch, he saw a customer attempting to cash a $4,000 fraudulent check.

"I asked the California gangster how he liked the beautiful Oregon weather and turned around and quietly told the lead teller to call the police," Pearson recalls. "He got wise when the teller nervously tipped him off and said he had to go out to his car."

Pearson and fellow U.S. Bank employee Martin Corder, followed the man outside to get a vehicle description. The man took off on foot, with the bankers in pursuit, for 13 blocks through downtown Ashland, side streets and alleys.

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"He was throwing out credit cards and fake ID as he ran," Pearson says. "Eventually, Ashland police spotted the chase and apprehended the suspect at gunpoint."

There’s got to be a better way to deter that kind of fraud, Pearson reasoned after the chase. So the banker turned his crime-stopping efforts to an attempt to erase the estimated $12 billion cost of check fraud.

Pearson’s solution in this complex age is rather simple. The check’s account and routing numbers printed in magnetic ink, which became an industry standard in the 1950s, is overprinted with characters and a bar in non-magnetic ink. So while a snoopy crook couldn’t make out an account number visually, the bank’s magnetic ink character recognition sensors see right through his patented MICR (Magnetic Ink Character Recognition) Line Blocker or Account Shield as they process checks.

"It works much in the same way as a credit card receipt blocks out all of the account numbers but the last four digits," Pearson says. "It gives people the option of not having to release personal account numbers to everyone they do business with. Instead it would be on a need-to-know basis for the bank and check writer."

Mike Burke of Sealy, Texas-based wholesale check manufacturer Unique Cheques says simplicity is what made Pearson’s contribution practical.

"You always hear talk about check fraud and there are always new things coming on the market," Burke says. "Everyone was trying to do something greater than anything else out there. From a technical aspect, you had ink that changes color when someone touches it and you had holograms on the checks. Everything they did was to make it more complicated and tougher for someone to forge checks.

"I guess they overlooked the simplest thing — if you can’t see it you can’t use it."

Pearson is in negotiations with check printing companies and doesn’t want specific images published until a deal is struck.

It took 18 months, 10 pages of submission and references to 20 previous patents before he obtained the patent — which gives him the ability to protect his idea in court.

Pearson’s first attempt was rejected by the patent office, primarily because the agency considered the possibility of ink or pen over the top of the account numbers back in the 1950s. But he appealed successfully and received notice of approval a month ago.

"The original inventors couldn’t have known the amount of check fraud," Pearson says. "It wasn’t until desktop publishing came along that people realized they could print up checks on a home computer."

Pearson says the patent is being field tested by the largest check printing companies in the nation with positive response. He anticipates an assignment of rights or the sale of the patent by the end of the year.

Reach reporter Greg Stiles at 776-4463 or e-mail business@mailtribune.com