The report said that as far back as 2007, Townes produced and sold up to 20,000 of the illegally produced passes through websites, including Craigslist. The MBTA traced 400 passes in March alone that totaled about $70,000.

Although the passes were unauthorized and the T reaped no financial benefit from them, they appeared legitimate and worked as other passes, making them virtually undetectable, the report said.

The alleged scheme was only discovered after a commuter rail operator asked a rider where he had bought his pass. When the rider said he'd purchased the pass on Craigslist, the operator became suspicious and confiscated the ticket.

An investigation by the MBTA Transit Police found that despite opening electronic gates, the printed serial number in the MBTA database did not show the card had ever been activated. Hundreds of similar passes in use by passengers were then discovered, the report said.

Investigators said the fraudulently produced monthly "ghost" passes were being used by passengers on all forms of MBTA transportation, including the commuter rail, subway, and buses.

The report noted that investigators are still trying to determine the full extent of the alleged scheme, which she said likely produced "something under $5 million" in illegal passes since 2007

MBTA General Manager Richard Davey said the T is ending its contract with Cubic and seeking reimbursement for the value of the illegally produced passes. He said the MBTA has also removed the equipment that allowed Cubic to produce passes.

"Our company has numerous safeguards designed to prevent fraudulent production or distribution of Charlie Tickets," the statement said, referring to the monthly MBTA passes. "We also intend to undertake a full internal investigation of this situation, with the expectation that additional safeguards will be put in place to prevent future fraud."