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Like I said, disputing a charge does not mean it's fraudulent. And written letter policy only applies to online charges without signed drafts.
In your case, your card was stolen and there was fraud. All you have to do is say you didn't do them. Some banks will make you sign an affidavit stating that fact.
It's a Catch-22 situation for the bank. When there's only one or two unrecognized charges on someone's account, it's generally not fraud. When someone steals a credit card, they're not going to sign up for a porn site. That would be like finding $5000 cash, buying a porn mag, and throwing the rest away.
Problem is, if a customer says it's fraud, we cannot prove it isn't. And you cannot prove it isn't either. Therefore, the chargeback has to be issued in favor of the customer. It all comes down to the burden of proof. It's on the bank and the merchant to prove the cardholder authorized the charge. And as I said, they only way to prove that is to subpoena the ISP for their logs. No judge will issue a subpoena for a $20-40 charge.
Anyways, intentional friendly fraud is not as rampant as everyone here thinks.
As for the fines, see my above reply to Mr. Fiction.
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