Blackmail and Bribery (Crime Scene Investigations)

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Crime Scene

Investigations

Blackmail and Bribery by Bonnie Juettner

Crime Scene

C

Investigations

Blac ail and Bribery by Bonnie Juettner

LUCENT BOOKS

A part oiGale, Cengage Learning

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Detroit · New Yo rk . San Francisco' New Haven, Conn . Wate rville, Maine' London

© 2009 Gale, Cengage Learning

ALL RIGHTS RESERVED. No part of this work covered by the copyright herein may be reproduced, transmitted, stored, or used in any form or by any means graphic, electronic, or mechanical, including but not limited to photocopying, recording, scanning, digitizing, taping, Web distribution, information networks, or information storage and retrieval systems, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher. Every effort has been made to trace the owners of copyrighted material.

LIBRARY OF CONGRESS CATALOGING-IN-PUBLICATION DATA Juettner, Bonnie. Blackmail and bribery / by Bonnie Juettner. p. cm. — (Crime scene investigations) “An imprint of Gale Cengage Learning.” Includes bibliographical references and index. ISBN 978-1-4205-0068-4 (hardcover) 1. Extortion—Juvenile literature. 2. Bribery—Juvenile literature. 3. White collar crimes—Juvenile literature. I. Title. HV6688.J84 2008 364.16’5—dc22 2008025864

Lucent Books 27500 Drake Rd. Farmington Hills, Ml 48331 ISBN-13: 978-1-4205-0068-4 ISBN-10: 1-4205-0068-6

Printed in the United States of America 1 2 3 4 5 6 7 12 11 10 09 08

Crime CrimeScene Scene

Investigations Investigations

Contents Foreword Introduction

4 6

A Web of Deception Chapter One

12

Taking Unfair Advantage Chapter Two

22

Exposing a Secret Crime Chapter Three

35

Spying on the Mob Chapter Four

49

How Much for a Politician? Chapter Five

64

Following the Money Chapter Six

78

Stinging a Cybercriminal Notes Glossary For More Information Index Picture Credits About the Author

92 96 97 98 103 104

Foreword

T

he popularity of crime scene and investigative crime shows on television has come as a surprise to many who work in the field. The main surprise is the concept that crime scene analysts are the true crime solvers, when in truth, it takes dozens of people, doing many different jobs, to solve a crime. Often, the crime scene analyst’s contribution is a small one. One Minnesota forensic scientist says that the public “has gotten the wrong idea. Because I work in a lab similar to the ones on CSI, people seem to think I’m solving crimes left and right—just me and my microscope. They don’t believe me when I tell them that it’s just the investigators that are solving crimes, not me.” Crime scene analysts do have an important role to play, however. Science has rapidly added a whole new dimension to gathering and assessing evidence. Modern crime labs can match a hair of a murder suspect to one found on a murder victim, for example, or recover a latent fingerprint from a threatening letter, or use a powerful microscope to match tool marks made during the wiring of an explosive device to a tool in a suspect’s possession. Probably the most exciting of the forensic scientist’s tools is DNA analysis. DNA can be found in just one drop of blood, a dribble of saliva on a toothbrush, or even the residue from a fingerprint. Some DNA analysis techniques enable scientists to tell with certainty, for example, whether a drop of blood on a suspect’s shirt is that of a murder victim. While these exciting techniques are now an essential part of many investigations, they cannot solve crimes alone. “DNA doesn’t come with a name and address on it,” says the Minnesota forensic scientist. “It’s great if you have someone in custody to match the sample to, but otherwise, it doesn’t help. That’s the

Foreword

investigator’s job. We can have all the great DNA evidence in the world, and without a suspect, it will just sit on a shelf. We’ve all seen cases with very little forensic evidence get solved by the resourcefulness of a detective.” While forensic specialists get the most media attention today, the work of detectives still forms the core of most criminal investigations. Their job, in many ways, has changed little over the years. Most cases are still solved through the persistence and determination of a criminal detective whose work may be anything but glamorous. Many cases require routine, even mindnumbing tasks. After the July 2005 bombings in London, for example, police officers sat in front of video players watching thousands of hours of closed-circuit television tape from security cameras throughout the city, and as a result were able to get the first images of the bombers. The Lucent Books Crime Scene Investigations series explores the variety of ways crimes are solved. Titles cover particular crimes such as murder, specific cases such as the killing of three civil rights workers in Mississippi, or the role specialists such as medical examiners play in solving crimes. Each title in the series demonstrates the ways a crime may be solved, from the various applications of forensic science and technology to the reasoning of investigators. Sidebars examine both the limits and possibilities of the new technologies and present crime statistics, career information, and step-by-step explanations of scientific and legal processes. The Crime Scene Investigations series strives to be both informative and realistic about how members of law enforcement—criminal investigators, forensic scientists, and others—solve crimes, for it is essential that student researchers understand that crime solving is rarely quick or easy. Many factors—from a detective’s dogged pursuit of one tenuous lead to a suspect’s careless mistakes to sheer luck to complex calculations computed in the lab—are all part of crime solving today.

INTRODUCTION

A Web of Deception

I

n 2008, a Liechtenstein bank revealed that it had paid nine million Euros (about $13.11 million) to a former employee, and his accomplice, since 2003. The employee had threatened to publish secret documents about the accounts of some of the bank’s German clients if the bank did not give him millions of Euros. He had successfully blackmailed the bank. His actions were illegal, but very hard to investigate. If the former employee had walked in and pointed a gun at a teller, taken money, and walked out again, the managers of the bank would have immediately phoned the police. The police would have gathered physical evidence, interviewed witnesses, and pursued him. If he had hacked into the bank’s computers, the bank could still have called the police. The managers would also have increased the security on their computers. However, because the employee possessed sensitive information about the bank’s clients, officials felt they were stuck. They feared that if they investigated this former employee or reported his actions to the police, he might immediately release the sensitive documents. At that point, even if they caught him, the damage would have been done. Meanwhile, the victims of Milwaukee alderman Michael McGee found themselves in an equally awkward position. McGee had told liquor store owners that he would pull their licenses if they did not pay him a bribe. (An alderman is a member of a city legislature or city council.) He convinced store owners to give him cash ranging in amounts from $500 to $2,500. When an election was called to recall McGee, he tried to force store owners to contribute to his campaign. Bribery is illegal. But McGee thought he could get away with it. He believed that getting a little extra money

A Web of Deception

from constituents was one of the perks of his job. Like the Liechtenstein bankers, the liquor store owners did not know what to do. McGee was a public official. They did not know if anyone would believe what they said about him. They were afraid that even if they were believed, McGee would have plenty of time to cancel their liquor licenses before going to jail. In a similar, but even more perilous, position are guestworkers from Mexico who come to work in the United States. Recruiters offer to bring these Mexican guestworkers into the United States. They promise to arrange visas for the guestworker recruits. (A visa is a document that allows a person to enter another country and stay there for a specified period of time.) This process is legal, if the recruiters arrange visas for the workers and pay them fairly for their work. But instead, the recruiters often coerce workers to come by threatening their families. Other times, they force the workers into debt by charging them huge fees ($1500 or more) to go through the visa process or to ride a bus into the United States. Then, once the workers are in debt, the recruiters make them keep working to pay off the debt. Sometimes recruiting companies steal visas from guestworkers, holding their papers to prevent workers from leaving the company. Often they do not arrange for visas at all and use the guestworkers’ undocumented status to intimidate them. These recruiters are extorting the guestworkers. They are demanding money. They are not threatening the guestworkers with guns or other physical weapons. They are threatening them with something almost as frightening—seizure by immigration officials and deportation out of the country. These workers are in the most desperate situation of all. Extorting them is illegal. But if they report the extortion to the police, they also have to reveal that they are in the country illegally. It might not matter that they had intended to enter the United States legally. Even if the extorters go to jail, the workers fear they might still be deported.

Blackmail and Bribery

No Crime Scene

Cases like these are very hard to investigate and prosecute. Investigators may never hear about most blackmail and bribery cases, because the victims are afraid to report the crimes committed against them. Even if someone reports the crime, investigating a case of blackmail or bribery is very different from investigating a murder case (although sometimes, murders occur that are connected to blackmail or bribery cases). In a murder case, there is usually a crime scene. A crime scene can be a gold mine of evidence for investigators. They can take fingerprints, take DNA samples from blood or hair, and sometimes even find telephones or pagers that help them trace the victim’s activities. In blackmail and bribery cases, however, there may be no crime scene. Instead, there is a web of relationships. Investigators may step in at any point in the web and must Cases of blackmail, bribery, and extortion involve the exchange of money for information, favor, protection, or silence.

A Web of Deception

find a way to trace the rest of the relationships. Victims are often afraid to come forward to help with an investigation. In a blackmail case, the victim often does not want the embarrassment of being identified. In an extortion case, the victim may be afraid for his or her life or the lives of family members or may fear being prosecuted for his or her own crimes. In a bribery case, there are bribers and bribees. Neither is likely to come forward to admit wrongdoing. The general public is the victim when public officials are corrupt. However, the general public does not have information about the case and cannot come forward on its own behalf.

Years of Work

Because it is so difficult to search out information about blackmail and bribery, the investigations can be long and arduous, involving years of police surveillance and interviews of witnesses. Many of the cases involve a conspiracy—a case in which several people agree to work together repeatedly to commit crimes. In a conspiracy case, investigators must gather enough evidence to convict each of the suspects. First, they must gather enough evidence to identify all the suspects. They may have to stake out a location and watch the entrances to see who comes and goes or send an agent undercover to find out more about the conspirators. Sometimes investigators get a court order to tap a suspect’s phone or install a microphone or camera in a location where the illegal activity is being planned. In those cases, they may have to sort through thousands of hours of conversations or videotape. Someone—a police officer, or a federal agent—is assigned to the phone or microphone surveillance at all times. Meanwhile, other agents may be interviewing witnesses, working undercover, analyzing computer evidence, or searching the files of financial institutions.

Joint Investigations

Each investigation has a team of investigators and technicians. Sometimes investigators from several different agencies work


Investigators often rely upon phone taps and other surveillance techniques to gather evidence when blackmail, bribery, or extortion is suspected.

10

together. Local police departments, the FBI (Federal Bureau of Investigation), the IRS (Internal Revenue Service), the DEA (Drug Enforcement Administration), the ATF (Alcohol, Tobacco and Firearms Administration), and the U.S. Marshals may all investigate a case at the same time. When this happens, these agencies share files and information and work together as much as possible. Even so, the cases are very expensive to investigate, because the government must pay for hundreds of hours of work from many different team members. Investigating can also be extremely dangerous, especially for agents who go undercover to gather evidence about a criminal organization. Is it worth it? Most investigators believe it is. Every time a victim sends a payment to a blackmailer or extortionist, and every time a public official is paid off, the perpetrators are encouraged to repeat their crimes. Furthermore, crimes such as blackmail and

A Web of Deception

extortion are often committed by criminals who are also committing much more serious crimes—and some of those crimes are violent. A case of extortion can lead investigators to a network of drug dealers or to a gang. In cases of bribery, corrupt public officials should make decisions that benefit the community, but instead they benefit the companies that are sending the bribes. Bribery benefits the rich, but hurts the poor. As a result, bribery puts democracy itself at risk.

11

CHAPTER 1

Taking Unfair Advantage

B

lackmail and bribery are crimes of opportunity. The blackmailer acquires information or photos and sees an opportunity to make money. The extortionist sees an opportunity to intimidate a person or business that is not in a position to reveal the extortion. The official who accepts or solicits bribes sees an opportunity to use his or her office to get money or gifts. Blackmail and bribery are also crimes of exploitation. They involve taking unfair advantage of someone who is not in a position to say no—or exploiting a situation, such as control of government contracts, to their own advantage.

Blackmail

Blackmail and bribery are different crimes, but they are related. Blackmail occurs when one individual has embarrassing information about another person and demands payment not to make the information public. The information can be in documents, photos, video, audio, or computer files. The blackmailer may have obtained the information legally or illegally. For example, in 2003, Peter Josef Vigan broke into a yacht. The yacht belonged to Australian cricket player Craig McDermott. Vigan hoped he could find money or valuable objects to sell. Instead, he found something else that he could use to his advantage—videotapes of McDermott and his wife in bed together. Vigan decided to blackmail McDermott. He stole the videos and wrote to McDermott saying that he had them. He told McDermott that he would not publish the video on the 12


Internet if McDermott paid him. Horrified, McDermott paid. He made eight drops at a shopping mall, leaving money for Vigan that added up to 50,000 Australian dollars. Vigan gained damaging videos of McDermott illegally, in a robbery, but his actions would still have been wrong even if he had, for example, accidentally purchased the videotapes legally at a yard sale. Sometimes public figures are blackmailed by people from their past, who remember incidents that would embarrass them if they were made public. Sometimes married people are blackmailed by former lovers or by someone who has access to a former lover’s possessions. Companies are sometimes blackmailed by hackers who gain access to customer files containing credit card numbers or other personal information.

Extortion

Extortion is a crime related to blackmail, but it involves a threat. In extortion, someone demands money not to do violence to another person or to property. The threat can be physical (“pay up or I’ll break your kneecaps”) or virtual (“pay up or your Web site will be down for the next twenty weeks”). Members of the Mafia or of gangs often regard extortion as part of doing business. Like blackmail, extortion is not a business deal, because the victim does not have the option to back out of the deal. Blackmailers and extortionists use threats to gain payment from their victims.

13


Bribery

Bribery is another way to exploit a situation to one’s advantage. Instead of making a threat, bribers offer a reward. For example, in 2007, Jiguveshkumar Patel, an Indian-American immigrant running a convenience store in New York City, decided to help his business partner solve a problem. Patel’s partner’s son was living in India, but he wanted to come to the United States. One of Patel’s convenience store customers had a daughter who worked for the United States Citizenship and Immigration Services. Patel went to the customer and offered the daughter a $60,000 bribe if she would arrange for his partner’s son to get a visa. He wanted the son to have a multiple entry visa, one that allows users to go back and forth between the United States and other countries more than one time. What Patel did was bribery. Bribery occurs when someone pays a public official to do something. The bribe can be used to speed up an action that the official has to do anyway as part of his or her job. It could be something simple, such as getting a child admitted to the school a parent prefers or, as in Patel’s case, expediting the process of getting a visa. Or it could be something bigger. For example, in 2006, a major in the U.S. Army admitted to investigators that she took $225,000 in Public officials in the United States are investigated and prosecuted when evidence shows that they have taken bribes in exchange for using their influence or status to give a specific person, company, or cause special treatment. 14


bribes to make sure that the Army hired a particular contractor to build and operate warehouses in Iraq. Bribery is not illegal everywhere. Not all countries have as strong a commitment to democratic government as the United States. In some countries, it is taken for granted that to get a public official to do his or her job, it is necessary to pay that

Becoming an Investigator or Detective Job Description: Investigators and detectives investigate and gather evidence about suspected crimes. A detective can work for a local police department, or can be a federal agent working for the Federal Bureau of Investigation (FBI), or for another federal agency, such as the Internal Revenue Service (IRS), the Drug Enforcement Administration (DEA), or the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF). Education: Aspiring detectives must finish high school and, preferably, college. Then they must complete specialized training at a police academy or, for FBI agents, the FBI Academy. To be considered for the job of detective, an applicant must also have several years of experience working in a related area. For example, some detectives previously worked as uniformed police officers or were in the military. An aspiring FBI agent must have a college degree and professional work experience in a specialized area, such as information technology, law, or linguistics. Qualifications: Investigators and detectives must pass a rigorous set of academic and physical exams in order to graduate from a training academy such as a police academy or the FBI Academy. Additional Information: An investigator or detective must be an honest person with a strong commitment to ethics and integrity. Salary: Police detectives can earn from $27,000 to $72,000 per year. Federal agents earn more, from $48,000 to $131,000 per year. Both federal agents and local detectives may earn more than their official salaries because of overtime.

15


person a bribe. In extreme cases, countries where bribery is normal are called kleptocracies. In kleptocracies, the country’s leaders are more interested in making money than they are in public service. Not only do they take bribes, but they embezzle—or steal—money from the government treasury. The country ceases to be a democracy, or even an autocracy, and becomes a kleptocracy. Literally translated, kleptocracy means rule by thieves.

No Fair!

A kleptocracy is the ultimate case of taking unfair advantage of a situation. But ordinary bribery and blackmail cases share this trait as well. Robert Mayer, a political scientist at Loyola University Chicago, explains it this way: We might say that what’s wrong with blackmail and bribery both is that something is being bought and sold that ought not to be bought and sold. The briber is buying an advantage and the bribee is selling an advantage (favoritism) that shouldn’t exist. The same is true with blackmail: silence is being bought and sold, but we think it shouldn’t be traded in this setting.1 Business leaders and government officials who accept illegal bribes provide their conspirators with an unfair advantage over those who cannot or choose not to resort to such tactics.

16


For example, special attention from By the Numbers a public official should not be bought and sold in the marketplace. The special attention, such as intervention in the visa application process, is an unfair advantage. Likewise, it is not fair to threaten to The number of people reveal information about someone’s past, convicted and sentenced especially if the information is personal in racketeering and and private and does not involve any extortion cases in the illegal actions. Philosophers like to argue about United States between blackmail and bribery. Some philosoAutumn 2003 and phers say that there is no moral reason Autumn 2004 why people or companies should not Source: United States buy special attention from a politician or a public official—by offering a Department of Justice bribe—if they can afford it. In the case above, for example, Patel was not hurting anyone. He wanted to help his friend. He believed his friend’s son was entitled to a visa and wanted to pay someone to speed up the process. Some philosophers even argue there is no moral reason why people should not charge money, as blackmailers do, not to reveal embarrassing information. These philosophers point out that blackmailers, like Vigan, the burglar who blackmailed the Australian cricket player, do not intend to harm their victims or to damage their victims’ reputations. They want to enrich themselves—and, these scholars argue, it is not morally wrong to come up with a scheme to make yourself rich. Other philosophers, though, argue that fairness means treating people equally. To be fair, an institution must apply rules the same way for everyone. A business transaction must allow free choice on both sides. A government official must treat everyone equally, regardless of how much money they have. If bribing government officials were legal, wealthy people would have more power over the government than poor people do. That would be undemocratic.

844

1


In the case of blackmail, the blackmailer, in many cases, is entitled, legally, to reveal embarrassing information. The crime occurs when the blackmailer demands payment not to reveal information (or publish photos or videos). What makes blackmail wrong is that the blackmailer uses the information to coerce his or her victim into offering money. The blackmailer takes away the victim’s freedom of choice. The victim is no longer a free and equal player in the situation. Blackmailers may think of themselves as entrepreneurs who have found a way to make some money. But blackmail is not a business deal, where both parties can freely choose to participate or not. Ethically, blackmail is no different than using a physical form of coercion (like pointing a gun at someone) to get money.

Access to Public Officials

A public official who takes a bribe is also guilty of treating people unequally. For example, suppose that a judge accepts a bribe to decide a case in a particular way or to give biased instructions to the jury. That is not fair. Not everyone can bribe a judge. Even if both parties in a case had the opportunity to bribe a judge, it would be impossible for a judge to accept bribes from and decide the case in favor of both parties. When someone Someone who wants to influence a court decision may resort to offering the judge a bribe to ensure a favorable ruling, which is unfair to the others involved in the case.

18


Intelligence A major part of any investigation is the collection of intelligence, or information. The FBI classifies its intelligence into several categories: human, signals, imagery, and open-source. Human intelligence comes from human sources. Investigators gather it by interviewing witnesses or suspects or by doing undercover work. Signals intelligence comes from electronic transmissions. Investigators can collect it by doing wiretaps (with a court order) or by intercepting other kinds of electronic signals. For example, the FBI sometimes receives intelligence collected by satellites (though it is rarely necessary to use satellite intelligence for a blackmail or bribery investigation). Imagery intelligence includes any type of image, such as photos or videos. Open-source intelligence comes from sources that are available to anyone, such as articles in the newspaper, public records, and professional conferences. Collecting intelligence is only one part of an investigator’s job, however. The next step is to analyze the intelligence. This means “connecting the dots,” or figuring out how each piece of intelligence relates to every other piece. It can mean developing a timeline of events, or mapping out the relationships between members of an organization. A still photo from a video taken during an FBI probe into a case of suspected bribery and extortion involving public officials shows money changing hands. Investigators often seek this type of imagery intelligence as they sort out the details of such cases.

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who works for an institution behaves unfairly, it means that rules and laws are not applied equally to everyone. The fair thing for a judge to do is to allow both sides in a case to present their evidence, making sure that neither side The number of people receives an unfair advantage. convicted and sentenced Likewise, it is unfair—and unethiin bribery cases in the cal—for a legislator to take bribes from United States between a company and then vote to reduce Autumn 2003 and that company’s taxes. For example, in 2006, an oil services company tried to Autumn 2004 bribe Alaskan legislators not to raise Source: United States taxes on oil. Many legislators took the Department of Justice bribes. The legislators were supposed to represent Alaskan citizens. They should have weighed the tax increase carefully. They needed to consider not only how the extra tax money might be used to improve rural Alaskan schools and health clinics, but also how the jobs in the oil industry might help the Alaskan economy. Instead, they chose to sell their votes. That was not fair. For one thing, the legislators were violating the terms of their contracts—their job was to represent Alaskans, not oil companies. Most importantly, however, accepting bribes meant that the legislators were not treating all parties in the political process equally. They were exploiting their positions to enrich themselves, and they were allowing businesses to have an unfair advantage in what was supposed to be a democratic political process. The votes were sold secretly. Alaskan citizens did not have the chance to make their legislators a better offer. They should not have needed to compete with oil companies in the open marketplace to buy back the services of their elected officials.

By the Numbers

138

A Secret Crime

It is not easy to uncover and prosecute crimes of blackmail and bribery. Before a case can be investigated, it must be brought 20


to the attention of law enforcement officials, such as the police or the FBI. But, says FBI agent Rich Davies, law enforcement agencies do not look for these kinds of cases. “Somebody comes to them,” says Davies. “They don’t fish for them.”2 It is not that investigators lack interest in blackmail and bribery. They are eager to investigate when the opportunity arises, partly because one investigation can often lead to a ring of related crimes. It is hard, though, to find out about cases of blackmail and bribery. These cases have something else in common: Everyone involved has a motive to keep it a secret. Blackmailers and bribers usually feel confident that nobody will come forward. Blackmail victims do not want to risk the embarrassment of having their secret become public. People who bribe public officials do not worry either. They know that to involve law enforcement an official first must admit to accepting bribes. When someone does report a case to law enforcement, it means that—from the blackmailer or briber’s point of view—something has gone wrong. These cases are like tangled knots of yarn. Once an investigator takes hold of one thread, he or she can unravel the whole knot. It takes patience, persistence, and sometimes years of surveillance and investigation, but eventually, investigators untangle the entire web. When they do, a string of indictments is likely to follow.

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CHAPTER 2

Exposing a Secret Crime

B

ecause blackmail and bribery do not cause their own crime scene, they can be difficult crimes for investigators to discover. Occasionally though, they can become the cause for other crimes. Some murders have blackmail as their motive. Sometimes blackmail victims murder their blackmailers. In a typical case, a married man has an affair, his lover threatens to tell his wife if he does not help to support her, and he murders her to prevent his wife from finding out about the relationship. Police investigating the murder may find out about the blackmail. Assault investigations, like murder investigations, can result in a discovery of blackmail or extortion, as police search for a motive for the attack.

Discovering a Case

Similarly, what begins as an accident investigation sometimes leads investigators into a corruption case. In November 1994, several truckers tried to reach semidriver Ricardo Guzman on CB radios or by beeping their horns at him. One followed Guzman for 10 miles, beeping his horn and trying to reach him on the CB. He and the others were trying to tell Guzman that the tail light assembly was about to fall off his 18-wheel semi-trailer truck. Guzman did not stop. Later he said he was afraid if he pulled over, police would find something wrong with his truck. There was something wrong with the truck. The tail light assembly fell off while Guzman was driving. It hit the gas tank of a minivan. In the minivan were Scott and Janet Willis and 22


Scott Willis recounts the 1994 highway accident that left him and his wife severely burned and six of their children dead. The accident investigation led to the discovery that Illinois state officials were taking bribes in exchange for issuing licenses to unqualified commercial truck drivers. their six youngest children, ranging in age from six weeks to thirteen years. After being hit, the gas tank exploded, trapping most of the children in the van and causing severe burns to Scott and Janet. All six children died as a result of the crash. During the accident investigation, Guzman could not answer the questions state troopers asked. He had to wait for a translator, because he could not speak English. When Joe Power, the Willises’ attorney, read the police report and realized that Guzman could not speak English, he was flabbergasted. In Illinois, speaking English is one of the requirements to get a commercial truck-driving license (CDL). “I was shocked,” said Power. “I knew from the beginning as soon as I saw the police report that there was a little odor here because how was he given a CDL when he couldn’t speak English.”3 The investigation led law enforcement to a web of corruption in the Illinois Secretary of State office. They began interviewing people who worked at the Department of Transportation (DOT, which is run by the Secretary of State). At the same time, some people who worked at the DOT were trying to contact the Willises, the police, and the FBI regarding the case. They anonymously phoned and sent packages of documents to the Willises and their attorney. 23


These phone calls and documents lead investigators to discover that managers at the Department of Transportation were accepting bribes from students at certain truck-driving schools. For a bribe of between $800 The number of drivers and $1200, an examiner would pass the Illinois Department a truck driver on the CDL exam, even if he or she could not read the of Transportation had to exam (which is written in English). retest after the Bribes They also found out that DOT for Licenses scandal c lerk Tammy Raynor had been became public trying to blow the whistle on the corruption in her office for fourteen months before the accident by sending the Inspector General’s office more than two hundred pieces of evidence. The Inspector General’s office, however, ignored Raynor’s evidence and discouraged her from pursuing the matter. Later, Raynor remarked,

By the Numbers

more than 10,000

I not only became suspicious, I became convinced, when I was giving an oral test under the direction of my manager when applicants began to fight over why one was getting a special endorsement when the other was not, and as the argument continued between the two applicants, it was brought up that one guy had paid $500 and the other guy had paid $700.4 The money was used to buy tickets to fundraisers for the George Ryan campaign. At the time, Ryan was the secretary of state, but he was running for governor of Illinois. Bribes from driver’s license exams ultimately contributed $170,000 to his election campaign. Like most people who are involved in bribery, the examiners who took bribes to pass truck drivers on their CDL exams probably did not think that they were doing anything wrong. They were not mugging people to get money. 2


They were not even keeping the money that they accepted as bribes—they were donating it to Ryan’s campaign, which they may have thought was a good cause. When officials take bribes to set aside safety rules and regulations, though, accidents can result. It turned out that not only had Guzman bribed someone in the Secretary of State’s office to get his commercial driver’s license, but the Willis accident was not his first accident. When investigators checked his driving record, they learned that Guzman had already been in six accidents. The Operation Safe Roads investigation took more than a decade. One FBI agent, Ray Ruebenson, delayed his own retirement so that he could see the case through to the finish. By the time the scandal became public, George Ryan was governor of Illinois. His position did not protect him from prosecution, however. In 2006, Ryan was convicted of several different criminal acts. The main charges were racketeering and conspiracy. (Racketeering is a charge that can encompass many kinds of criminal acts, including bribery. A racket is an organization formed for the purpose of making money illegally.) Ryan also was convicted of mail fraud, because he accepted some bribes through Former Illinois governor George Ryan leaves a federal courthouse in April 2006 after being convicted in his corruption trial stemming from a complex bribery scheme that funded his campaign.

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Obstruction of Justice

A

fter the Willis family accident, two workers in the Illinois Department of Transportation decided to take matters into their own hands. Tammy Gaynor had already been collecting documentary evidence for fourteen months. She wore a long winter coat to work even in July, concealing evidence in its pockets. She went through garbage cans and took photos. She even made her own notes. Meanwhile, Tony Berlin kept a log of drivers he suspected had gotten their licenses by paying bribes. His log was seventy pages long. Both Gaynor and Berlin took their evidence to the Inspector General’s office. The Inspector General’s office is an independent state agency in Illinois. It is dedicated to investigating allegations of official misconduct. In 1994, though, the Inspector General, Dean Bauer, was a friend of Illinois Secretary of State George Ryan. Bauer told his subordinates not to follow up on the DOT investigation. He told Raynor and Berlin, “Our job is to protect George Ryan, not to embarrass him.” Gaynor and Berlin did not know what to do. Finally, they went to Joe Power, the attorney for Scott and Janet Willis. They also went to the U.S. Attorney’s office and repeatedly asked that the matter be investigated. Eventually, Dean Bauer was indicted and pled guilty to obstruction of justice. Quoted in Ray Gibson. “Corruption Case Bloomed from Seeds of Safe Road Probe.” Chicago Tribune, April 18, 2006, http://www.chicagotribune.com/news/local/ chi-0604180300apr18,0,7943327.story.

the mail, and of lying to the FBI, because he falsely told investigating agents about how he paid for his vacation. In addition, he was convicted of obstructing the IRS and filing false tax returns (because he did not report the bribes on his income tax). Ryan was not the only official to be charged and convicted in the investigation. In all, seventy-five officials were convicted on various corruption charges. 26


Following a Paper Trail

While accidents and violent assaults always draw the attention of investigators, sometimes cases begin more quietly. Sometimes police or reporters stumble upon a paper trail—one document that leads to another. While one document alone might not be very incriminating, sometimes a group of documents shows a pattern of payoffs by one individual to another. For example, normally, if the government needs to hire a company to do something, it will invite interested companies to submit bids for the work. The bids are generally sealed, so businesses do not know whether their bid was the lowest or not. Government officials then open the bids, compare them, and decide which bid offers the best deal. If a politician consistently interferes in the process of bidding for government contracts, someone may eventually notice that the lowest bidders are not receiving the contracts. Or it may be noticed that certain contracts did not go through a competitive bidding process.

An investigation into the finances surrounding the construction of the Metropolitan Courthouse in Albuquerque, New Mexico, revealed a paper trail that revealed a bribery scheme involving the president of the state’s senate, Manny Aragon, and companies that worked on the building.

27


One such paper trail was uncovered in 2002, when businessman Harvey Peel sued his partner, Raul Parra, over work their companies did on a courthouse in Bernalillo County, New Mexico. Peel claimed that Technologies West, a company he and Parra owned together, was overcharging the state of New Mexico for work it was doing on the district courthouse. Peel’s allegation of overcharges caught the attention of the FBI. If it was true, it meant that Tech West had been submitting fraudulent invoices to the state, and the FBI needed to investigate. If true, it might also explain why several local buildings constructed for the state at about the same time had all been over budget. The three buildings—the Bernalillo County Courthouse, the Metropolitan Courthouse, and the Metropolitan Detention Center (a jail)—had recently been completed. These buildings were finished late and over budget. The Detention Center opened in 2003, two years late and $33 million over budget. The Metropolitan Courthouse opened the following year, after contractors spent $36.5 million more to build it than the legislature had planned. Construction projects rarely finish on time, and contractors rarely spend only the amount they originally budget. Although these three projects were completed even later and more over budget than usual, there still might have been a reasonable explanation. The FBI asked questions and followed a paper trail that began with Harvey Peel’s lawsuit against Raul Parra. The lawsuit alleged that one of their companies, Technologies West, was paid $160,000 for work on the Metropolitan Courthouse. Out of that $160,000, two checks were made out to cash. These checks totaled $50,000. In Technologies West accounting books, a notation read “Manny—$50,000.” Investigators suspected that “Manny” was Manny Aragon, president of the New Mexico state senate. They began an arduous process of conducting interviews and combing through documents. They interviewed state auditor Domingo Martinez and the Metro Court chief judge, Judith Nakamura. They also talked to Bernalillo County manager Juan Vigil. Everywhere they went, they asked for documents related to building construction. 28


Manny Aragon, center, exits federal court in Albuquerque, New Mexico, after his arraignment in April 2007 on charges that he received $700,000 in kickbacks from a company contracted to build the Metropolitan Courthouse.

The paper trail led agents in several different directions. One led to another Peel/Parra business, P2RS Group, an electrical systems contractor. P2RS installed technology, such as audiovisual systems, in the Metropolitan Courthouse. The company was also paying Aragon an annual retainer. A retainer is money paid to someone to ensure that that person will stand ready to help the company if it needs help. P2RS president Darryl Ruehle remarked, “(It was) classified as a retainer since he never really did anything for us.”5 Ruehle’s comment alerted investigators. It did not seem likely that a company would pay someone, especially a politician, to do nothing. Investigators found, in fact, that Aragon did do something for the contractors and subcontractors who worked on the courthouse. In 1998, when Aragon was still the New Mexico Senate president, the legislature held a special session. During that session, Aragon pushed the legislature to pass a bill to allow the New Mexico Finance Authority to issue up to $46.5 million in bonds to help pay for the courthouse. The courthouse was already over budget, and the legislature needed to pay for it. Issuing bonds is one way governments borrow money. They sell the bonds, and people hold onto the bonds and eventually redeem them for the amount they paid plus interest. 29


What the legislature did not yet realize, though, was that the courthouse construction was over budget in part because the contractors were overcharging them. The FBI convinced some members of the conspiracy to testify about what was happening. The contractors had put together false invoices, requests for payment that did not reflect the real cost of materials and labor. Court administrator Toby Martinez made sure that the invoices were approved and paid. The money was sent to the contractors. Then, the contractors took some money out as cash and used it to make payments to Martinez, Aragon, and others. This kind of payment is called a kickback. Courthouse architect Marc Schiff testified about one occasion when kickbacks were paid. He met Aragon, Martinez, former Albuquerque mayor Ken Schultz, and Parra at an Albuquerque restaurant. Schiff told investigators, “The purpose of the meeting was to make a final payment of $30,000 to Aragon. Prior to the meeting I had given Schultz $30,000, which Schultz passed to Aragon at the table.”6 In all, the conspirators had taken an extra $4 million from the construction costs. Although Aragon was eventually indicted for taking $700,000 in payoffs and Parra was indicted for taking $773,000, the conspiracy revolved around Martinez and his wife Sandra. About $2.05 million was traced to the Martinezes. Toby Martinez had to approve the fraudulent invoices. His wife, Sandra, started a business, Smart Solutions, partially for the purpose of laundering the money. Laundering money is a way to make the paper trail so complex that investigators lose track of it. Money is broken into smaller amounts and transferred from one account to another, until it is finally taken out of the accounts in a way that looks legal, such as paying a business for a service. Money laundering, however, does leave a paper trail, even though it is a complex one. In this case, FBI investigators pieced together the trail and followed it straight to Sandra Martinez and her co-conspirators. In addition to the charges resulting from the kickbacks, each faced extra prison time for conspiracy, money laundering, and mail fraud (because invoices and checks were sent through the mail). 30


Kickbacks in History

A

merican history is full of stories of politicians who have received kickbacks from contractors. The most prominent politician to receive kickbacks may have been Spiro Agnew, Richard Nixon’s vice president. While Agnew was vice president, investigators learned that he had previously accepted kickbacks when he was governor of Maryland. Agnew had intervened to make sure that particular construction companies got contracts to work on Maryland roads. Later, the contractors gave Agnew a payment equal to 2.5 percent of the contract value. Agnew also was accused of accepting kickbacks while he was vice president. At first, Agnew argued that a sitting vice president could not be indicted while in office. Then the solicitor general, reviewing the matter, issued a brief (legal document) noting that vice presidents could be indicted if they were in office. Agnew pleaded guilty to failing to report the income on his income tax and resigned from the vice presidency. The Teapot Dome scandal of the 1920s reached almost as high a level in the government. President Warren Harding’s secretary of the Interior, Albert Fall, granted two oil companies the right to develop a federal oil reserve. In return, he received large cash gifts. Fall was later convicted and went to prison. President Harding took the news of Fall’s corruption badly, and his health deteriorated as a result. Harding died before Fall was convicted. Vice President Spiro Agnew announces his resignation to the nation in 1973 in the wake of investigations that exposed kickbacks he had received when he was governor of Maryland.

31


When Victims Come Forward

Sometimes investigators discover a case of blackmail or bribery because blackmailers underestimate their victims. They assume the victims will be too embarrassed to come forward. In some cases, victims decide that they would rather be embarrassed than continue paying their blackmailers. This is how investigators caught Peter Vigan, the blackmailer who The plan by Peter Vigan, pictured, to blackmail Australian cricket star Craig McDermott was thwarted when McDermott informed police of the plot and worked with them to capture Vigan.

32


stole videotapes from the yacht of Australian cricket player Craig McDermott. At first McDermott went along with the blackmail. He was very concerned about the embarrassment he and his wife would experience if the videos were uploaded to the Internet. He made payments of $5,000 and $10,000 at a time, dropping the money off at shopping malls. Vigan, however, never stopped asking for payments. After receiving another request for $10,000, McDermott finally went to the police. They had him set up the meeting for the final drop. Before he left to drop off the money, they fitted him with a body wire, so he could record his conversation with Vigan. Vigan, talking to McDermott on the phone, told McDermott to put the money in two containers in holes in the ground. Although Vigan was on the phone, he was in the vicinity, so officers figured out who he was. As Vigan tried to flee, they tackled him, pinned him to the ground, and arrested him.

One Target Leads to Another

At other times, the investigation of one target can expose others. In cases of extortion or bribery, rarely is only one person committing the crime. Usually a network of people is involved. A group of people who are all involved in repeated crimes is a conspiracy. FBI agent Rich Davies says that in conspiracy cases, it helps to find a weak link—a minor player in the network who can provide information about it. Investigators can confront the weak link with the evidence, and offer him or her a chance to cooperate with the investigation in return for a reduced sentence. The weak link should be someone who has information about the conspiracy. At the same time, says Davies, “You don’t want to cut someone a break who doesn’t need to be out of jail.”7 In the New Mexico courthouse scandal, architect Marc Schiff became the weak link. In Operation Safe Roads, investigators worked their way from clerks in the Illinois Department of Transportation all the way up to the governor’s office. 33


They found several weak links. Slowly, they mapped out the connections, finding players who were willing to plead guilty and cooperate with the investigation. Regardless of how blackmail, extortion, and bribery cases come to the attention of law enforcement, the cases receive high priority. Investigators hope to prevent tragedies like the accident that claimed the lives of the six Willis children. Remembering that case, Assistant U.S. Attorney Patrick Collins reflects, “There’s a very high price the public pays for corruption.”8

3

CHAPTER 3

Spying on the Mob

I

n 1983, someone phoned the Massachusetts State Police with a tip. A well-known bookie had been seen entering Heller’s Cafe, near City Hall in Chelsea. (A bookie is a person who takes and pays off bets, which is illegal in most states.) Detective Joseph Saccardo went to Chelsea to check it out. When he got to Heller’s Cafe, he ran the license plate numbers of nearby cars through the Registry of Motor Vehicles computer. It was a routine check, so Saccardo was not expecting to recognize any names, but he did. The Registry of Motor Vehicles sent back a list of names that The Boston Globe called “a veritable Who’s Who of Bookmaking.”9 At least six of the cars near the cafe belonged to prominent bookies. In the end, Saccardo’s routine tip led him from the bookies to the mob leaders who were extorting them—forcing them to pay a fee for running an illegal business in gang territory and threatening them with violence if they did not pay. But identifying the extortionists was only the beginning. Putting them in jail took years of police work.

Complicit Victims

Most investigations of extortion by the mob or by gangs begin as this one did—in an almost random way. An investigator gets a tip, happens upon an important piece of evidence, or an investigation of a related matter leads detectives to clues that suggest extortion is going on. It would be simpler if victims of extortion could go to the police. But they usually have a strong motive not to. One motive might be fear of their extortionists. Often, though, victims of extortion are involved in illegal businesses, such as gambling or drug trafficking which prevent them from reporting their extortionists to the proper authorities. 3


Rarely will a bookie or a drug trafficker who is being extorted go to the police. To prove the extortion is happening, he or she has to reveal the illegal business and face possible jail time. There also might be reprisals. Some gangs beat up or kill witnesses who testify against them. On the other hand, if bookies and drug dealers pay the extortion money, they may gain benefits. Others know they are under the protection of the gang or the Mafia. They may be able to go to their protectors for help or for revenge, if they are attacked or robbed. (For the same reason drug dealers do not go to the police to report extortion, they are unlikely to go to the police if someone robs them and takes all the money they had earned selling drugs that day. The police would investigate the robbery. They would also do whatever they could to put the dealer out of the business of selling drugs.)

Flipping Informants

Occasionally, extortion victims do go to the police or to the Federal Bureau of Investigation (FBI). Other times, investigators find out about the extortion independently and confront the victim. If the victim appears to be a weak link in a web of extortion, investigators may try to flip the victim, meaning get him or her to work on the side of law enforcement in return for protection and, perhaps, leniency if the victim also goes to court and is sentenced. When victims agree to this, it is often because they do not have enough money to pay the extortionists, and they fear for their lives if they do not pay. This is what happened in Detective Saccardo’s case. In the South Boston area, illegal businesses, including bookies and drug dealers, had to pay tribute to either the Italian Mafia or an Irish gang run by James “Whitey” Bulger and Stephen Flemmi. Timothy Connolly owned a cafe in South Boston. In 1989, he got involved with a drug dealer and agreed to pay off $40,000 the dealer owed to Bulger. But he could not keep up the payments. Connolly was taken to the back room of a variety store. Bulger met him there, drew a long knife from a sheath 36

Spying on the Mob

on his leg, waved it in Connolly’s face, By the Numbers and then stabbed nearby boxes to make his point. He informed Connolly they were fining him an additional $50,000. Connolly tried to keep making the payments, but two years later, he was out The amount of violent of money. crime committed by Connolly went to the U.S. Attorney’s gang members yearly office and made a deal. He became an informant for the FBI. The FBI gave Connolly money that he could use to keep making payments to Bulger. He was fitted with a body wire and used it to record conversations over the next year, giving the FBI the evidence it needed for indictments against Bulger and Flemmi.

about 6%

Two Years of Surveillance

It is important for investigators to have informants record their conversations. An informant who has a criminal history may not have much credibility with a jury. The jury may think that a criminal is likely to lie to them. Recording provides proof that the conversations actually occurred. Besides using informants, investigators have other means for collecting evidence against extortionists. If they can provide a judge with probable cause to believe that illegal acts are being planned in a specific location, they can get a court order to bug that location. Agents may do this by planting hidden microphones, and in some cases hidden cameras, inside an area where suspected illegal activity is known to be taking place. At Heller’s Cafe, Saccardo suspected he had found the “bank,” or the place where bookies, also called bookmakers, bring the illegal money they make. In this kind of bank, bookies bring in checks made out to cash or checks made out to fake names. They exchange the checks for cash. Saccardo’s suspicion, though, was not proof. For the next two years, Saccardo and other officers staked out Heller’s Cafe. They sat in a nearby construction trailer and watched 3


With a judge’s permission, investigators can use hidden microphones and other electronic devices to record and monitor the conversations of suspected criminals in order to gather evidence of their illegal activities.

the entrance, recording the bookies’ comings and goings. After two years of surveillance, they had enough evidence to get a judge to issue a court order allowing them to enter and bug the cafe. In the middle of the night, police technicians installed a tiny microphone in the top of a bulletproof teller booth. They spliced another microphone into a window frame, and they put wiretaps on two phones. The investigation entered a new phase. 38

Spying on the Mob

Looking for Money Laundering

When investigators began listening in on the bookies’ bank, they expected to find evidence of money laundering. To launder money, bookies might exchange it for another currency and then exchange that currency for the original currency. For example, they could exchange American dollars for the same amount of money in Mexican pesos or Japanese yen. Or they Organized crime leader Stephen Flemmi, center, was a key figure in the investigation into the extortion of bookies, loan sharks, and drug dealers in Boston in the 1980s.

39


Money Laundering

M

oney laundering is the way that criminals try to make stolen money, or money from other illegal activity, safe to spend. It is a way to prevent detectives from tracing the money back to the crime. Money laundering is a crime. It is generally practiced by people who have already committed other crimes, such as bookies, drug traffickers, embezzlers, corrupt politicians, mobsters, terrorists, and con artists. Usually, the process of money laundering involves three basic steps. The first one is to put the money in a bank. Often the money is taken to the bank in small amounts, to avoid arousing the suspicion of investigators. The second step, called layering, is transferring the money to other accounts. Sometimes money launderers transfer money to accounts in other countries. They continually vary the amounts to make it harder to trace. Often they change currencies, converting American dollars, for example, into Mexican pesos. Or they buy and sell expensive items, such as boats, houses, cars, and jewels. Finally, the money is considered clean. Investigators cannot easily trace it back to the original crime. The electronic banking system may prove to be the downfall of money launderers, however. There is always a record of bank transfers. Any sale not made in cash leaves a trail somewhere. Increasingly, money launderers are finding it difficult to cover their tracks, and they are going to prison. The average money-laundering sentence in the United States is six years. Money laundering describes the activity of taking money obtained through illegal means and moving it through various accounts and other transactions, such as currency exchanges and purchases, in order to make its origins difficult to trace.

40

Spying on the Mob

might make many small deposits to a By the Numbers bank account, breaking up the original amounts and transferring the money from one account to another. The money then appears to be “clean” (legal), not “dirty” (illegal), because it cannot easily be traced back to an illegal activity. The number of violent Money laundering is a federal crime, crimes committed by and the bank at Heller’s Cafe was “washing” about $50 million a year. But when gang members yearly investigators listened to the bookies talking, they learned about more than money laundering. They found out that the bookies had to pay protection money to the mob. They were being extorted. “They know you’re not paying rent to them,” said veteran bookie Mikey London on one of the tapes from the bugs in Heller’s Cafe. He was lecturing a rookie who was not paying any protection money, as, unknown to them, investigators listened. “They want rent from you, that’s all. Cut and dry. If they don’t have your name, the other guys are going to get your name—Stevie and Whitey.”10 What London meant was that in South Boston, bookies had to pay someone for protection. They had to pay either the Irish gang led by Stephen Flemmi (“Stevie”) and James “Whitey” Bulger or the Italian Mafia. As long as the bookie paid someone, he was safe from attacks. If he were attacked, the group he was paying his protection to would take revenge on his attackers. But if he chose not to pay anyone, they would go after him. London did not especially approve of Flemmi (“Stevie”) and Bulger (“Whitey”). He wanted his protégée to pay the Mafia instead. “Stevie can’t hold this guy’s jockstrap. Vinnie will work for you. I’m not saying he (Flemmi) ain’t a good guy. I’m saying that if you’re with this guy, there’s a big difference in being with him and being with Stevie. Stevie’s not a collection agency, personal protection. This guy here will go to bat for you.”11

about 373,000

1


Dual Investigations

Bookies were not the only businessmen who had to pay tribute to the mob in South Boston. Loan sharks and drug dealers did as well. While the Massachusetts State Police was investigating the extortion of bookies and loan sharks, the federal Drug Enforcement Administration (DEA) was investigating extortion of drug dealers. Both investigations led to the same people. Throughout the 1980s, the DEA heard from informants about Bulger and Flemmi. DEA investigators learned that Bulger (“Whitey”) made drug dealers pay “rent” for every gram of cocaine they sold. In 1981, a convicted drug smuggler told the DEA that smugglers were giving Bulger and Flemmi suitcases full of money. In return, Bulger and Flemmi promised to protect them from the Mafia. It would have been a business deal—an illegal business deal—if the dealers had had a choice. They did not. One drug dealer told a DEA agent, “You either pay Whitey Bulger, or you don’t deal, or you wind up dead.”12 One dealer later told investigators that he sold tons of marijuana, then paid Bulger $500,000 in rent. “Smith,” a Massachusetts State Police informant, told them that Bulger and Flemmi had set up a system. Drug dealers paid either a fixed fee or a percentage of their profits. In 1988, a DEA informant complained that Bulger and Flemmi skimmed off so much of the profits that they drove South Boston cocaine prices from $20,000 per kilogram to $28,000 per kilogram. By the Numbers The DEA investigation went well. In the end, investigators charged fiftyone South Boston drug dealers with possession and sale of drugs. Only one The percentage of moneyof them could be flipped, but he refused laundering defendants to testify against Bulger and Flemmi or provide the DEA with any evidence to who plead guilty convict them.

9 out of 10

2

Spying on the Mob

The Losers

For years, investigators struggled to produce a case against the gang leaders. It did not go well. At first, state troopers got a tip that Bulger and his gang were working out of a garage. State troopers staked out the garage and kept track of Bulger’s comings and goings. They observed drug dealers, loan sharks, and hit men (assassins) arriving at the garage. After six months of observing that location, a judge allowed troopers to put a bug in the garage. Troopers had one problem after another with the bugs. One was squashed when a 400-pound Mafia associate sat on it. Other bugs kept picking up radio transmissions. “We’d hear all the comings and goings of the ambulances across the city, it was terrible,”13 said one trooper. By the time investigators worked out the technical details, Bulger seemed to have figured out that he was being bugged. The gangsters listened to the news on radio station WEEI, and, says a trooper, “Whenever they’d hear a story about a crime, they’d stop and discuss the social significance of it. They’d be saying, ‘You can’t walk the streets anymore ... it’s terrible how The FBI-issued poster identifies mobster James “Whitey” Bulger, one of the leaders of an extortion ring involving Boston-area criminals, as one of its ten most-wanted fugitives.

43


bad the crime is.’ We’d be rolling on the floor laughing.”14 The operation became so demoralizing that troopers assigned to it called themselves, “The Losers.” In the end, it was the bugs of Bulger and Flemmi’s extortion victims, rather than the bugs aimed at Bulger and Flemmi themselves, that finally brought the investigation to a close. Working with the leads provided by state police (using the bugs at Heller’s Cafe), federal prosecutors confronted the bookies. The bookies were used to paying occasional small fines for illegal gambling, but they were horrified when prosecutors threatened to prosecute them for money laundering. To avoid the charges, the bookies agreed to testify that they were being extorted. The information led to the arrest and indictment of Flemmi.

The Mob

P

eople tend to use words such as the Mafia, the mob, and gangs interchangeably. All three terms refer to organized crime—crime that is committed by an organization that exists for the purpose of illegal activity. This organization can be called a gang or a mob. Members of the organization are called gangsters, or mobsters. The Mafia refers to a gang that was originally organized by immigrants from Sicily. Members of the Mafia are often called wiseguys. A gang is more than just a network of people who all know each other and commit crimes together. Gangs tend to have a hierarchical structure, with layers of authority, like a business. For example, the Latin Kings, a Midwestern gang, has bylaws that describe the gang’s chain of command—who reports to whom. This structure can be helpful to investigators. If they can get copies of the bylaws and the names of the gang leaders, they can focus the investigation on those individuals. A good investigation can decimate the ranks of a gang and make it much harder for it to stay in business. 44

Spying on the Mob

Bulger, though, escaped. He is curBy the Numbers rently on the FBI’s Top Ten Most Wanted list, along with other fugitives such as Osama bin Laden. Like all the fugitives on the FBI’s list, Bulger is considered The percentage of armed and dangerous. Although investigators would still like to put him behind money-laundering bars, they remain pleased with the outdefendants who have come of the decades-long investigation. a prior conviction They feel they put Bulger out of business. James Ring, the head of the FBI’s Organized Crime unit in Boston, put it this way: “Individuals who are fugitives cannot operate a business. You can survive, but you can’t be a leader and you can’t operate a business.”15

1 out of 3

Going Undercover

In the South Boston case, investigators used visual surveillance, planted audio bugs, and flipped informants to help them gather information about gang and Mafia activities. Sometimes, though, investigators risk their own lives by going undercover to gather information. Going undercover is risky because members of the mob, or of gangs, may become violent if they discover that someone they trust is informing law enforcement. An undercover investigator’s cover may be blown if he or she is seen with the wrong person, is recognized by someone, or says something that tips gangsters off to his or her true identity. If an undercover investigator is wearing a wire to record conversations, the criminals could discover the wire or tape recorder. Because undercover work is so dangerous, the FBI does not send agents undercover unless they have gone through special training to prepare for the experience. The FBI also tries to avoid sending agents undercover, not wanting them to risk their lives unless it is absolutely necessary. In spite of the risks, though, many investigators are eager to work undercover. They hope that by working with a gang, they can find out details of gang activities that are impossible to learn on the outside.


Former FBI agent Joe Pistone’s work undercover with the New York Mafia resulted in more than one hundred convictions. The 1997 movie Donnie Brasco was based on Pistone’s experiences.

One FBI agent, Joseph Pistone, became famous after he spent six years undercover with the Mafia in New York. Pistone took the name Donnie Brasco. (In 1997, Johnny Depp played Pistone in a movie about the case.) Pistone had gone undercover before. Previously, he had penetrated a band of thieves who were hijacking trucks, bulldozers, and other heavy equipment all along the East Coast of the United States. Pistone was chosen to go undercover in that case because he 46

Spying on the Mob

knew how to drive bulldozers and eighteen-wheel semi-trailers. His work broke up the ring and led to the arrest of all thirty hijackers. In the Mafia case, Pistone posed as a jewel thief and burglar. Before going undercover, he spent two weeks studying the jewelry industry. Afterward, Pistone testified before Congress about how difficult it was to gather information about the Mafia, even undercover. The Mafia, Pistone explained, gave out information on a need to know basis: There were people I worked with closely for six years who never told me their last names, only their nicknames. If you did inquire, you were viewed with great suspicion, since it could only mean you were a cop or an informant. To say the least, this latter rule complicated my undercover role—and contributed to its longevity.... Rarely are things discussed over the phone, and rarely do cooperating witnesses know much beyond their own cell or crew. Fortunately for our investigation, Lefty Ruggiero, a Bonanno soldier who became my business partner when I was on the streets, took it upon himself to educate me in the ways of being a wiseguy. He spent hours telling me about the proper conduct for mob members and associates....He best summed up this world of deception by once telling me that what was so great about being a wiseguy was that, “You can lie, steal, cheat, kill, and it’s all legitimate.16 Ruggiero may have thought the mob’s activities were legitimate, but Pistone’s testimony eventually led to more than two hundred indictments and more than one hundred convictions, including Ruggiero himself. He was sentenced to twenty years in prison. The arrest saved Ruggiero’s life, however. FBI agents arrested him as he was being escorted to his execution. The Mafia had taken out a contract on his 47

life after discovering that Donnie Brasco, Ruggiero’s good friend, was really an FBI agent. They took out a contract on Pistone’s life, too. Pistone and his family went into the Witness Protection Program. But Pistone remains proud of his accomplishment. About the contract on his life, he says only, “If they can do it, let them come. All you can do is try and defend yourself.”17

CHAPTER

How Much for a Politician?

I

n 2006, Rick Smith, the vice president of Veco, an oil field services company, was on the phone with Pete Kott, the Speaker of the House in Alaska’s state legislature. “I need a job,” said Kott. “You’ve got a job,” Smith replied. “Give us a pipeline.”18 Neither Kott nor Smith realized that the FBI was listening. They had other things on their minds. Kott had lost his bid for reelection to Alaska’s legislature. He wanted a job working for Veco. Specifically, he wanted to become a warden at a prison Veco was building in Barbados. Smith wanted Kott to use his position, while he still had it. He wanted Kott to do two things. First, he wanted Kott to convince the legislature to keep the new petroleum production tax (PPT) at 20 percent. This was important to Smith, because every percentage point the tax went up caused oil companies to lose hundreds of thousands of dollars. Failing that, he wanted Kott to kill the legislation so the tax would have to wait for the next legislative session. Secondly, he wanted Kott to get the legislature to agree to let oil companies build a natural gas pipeline. In the end, neither man got exactly what he wanted. Kott did kill the PPT bill for Veco; however, he was also charged, tried, and convicted of bribery, extortion, and conspiracy. He was sentenced to six years in prison. Alaska did decide to build a gas pipeline. By the time that decision was made, though, Smith had pled guilty to bribery and conspiracy. He agreed to cooperate with the FBI’s ongoing investigation, hoping for leniency in his prison sentence.


Former Alaska state lawmaker Pete Kott, left, accompanied by his daughter, Pam Kott, leaves federal court in December 2007 after being sentenced to six years in prison for his involvement in bribery, extortion, and conspiracy activities.

Fed Up With Corruption

The FBI did not reveal where it got the tip that began the Alaska investigation. It may have begun when Alaska politician Ray Metcalfe began a personal campaign against corruption in the legislature. Suspecting that many legislators were taking bribes from oil companies, Metcalfe began collecting evidence. When he felt he had enough evidence, he took it to federal prosecutors. At first, he was disappointed by the response. I laid hundreds of pages of detailed information alleging bribery, and I distributed it to federal authorities, I distributed it to the U.S. Attorney’s office, I distributed 50


it to the Office of Special Prosecutions, and we held a demonstration in front of the attorney general’s office that hardly anyone showed up for.19 But Metcalfe may have drawn attention to the problem. Perhaps the investigation was already underway. Prosecutors began to gather information. Eventually, they had enough to convince a judge to authorize a wiretap.

Wiretaps

If investigators find enough evidence to make a judge believe there is probable cause to think that a crime occurred or is being planned, they can get a court order authorizing the use of a wiretap. A wiretap allows investigators to listen to a suspect’s phone conversations. Investigators are subject to strict rules governing their use of wiretaps. They cannot simply turn a wiretap on and let it record everything. Instead, they must physically listen to the wiretap while a conversation is going on. (They do not have to be at the scene—the wiretap can carry the conversation to a law enforcement office with a wiretap room.) If the conversation turns to personal topics, unrelated to the commission of a crime, investigators must turn off the wiretap. Then they can periodically spot check the tap to see if the conversation has turned back to crime-related topics. (The amount of time investigators are required to wait between spot checks is determined by a court order.) For a wiretap on a phone, investigators can carry out the installation at the phone company. But to plant a bug that will not be attached to a phone, investigators must get a search warrant for a clandestine entry—an entry in which they secretly enter a suspect’s home, office, hotel room, or car. Then they install audio equipment and leave. In the Alaska corruption cases, investigators used both kinds of audio tapes. They tapped the phones of two of Veco’s executives, CEO Bill Allen and vice president Rick Smith. They also planted audio bugs and video recording equipment in Suite 604 51


How Wiretapping Works With a court order, investigators can use a wiretap to listen in on a suspect’s telephone conversations. A wiretap works like this: irst, investigators obtain a court order. This is very important. If 1Fthey install a wiretap without court authorization, any evidence

they collect from the wiretap will be inadmissible in court, so it cannot be used to convict a suspect.

nvestigators open the phone receiver and expose the red and 2Igreen wires. These wires form an electrical circuit. They transmit the sound of a voice as a fluctuating electrical current.

nvestigators attach a bug, an electronic device that can pick up 3Iand transmit sounds, to the red and green wires. It becomes part

of the circuit and picks up the fluctuating electrical current and sends it on into the rest of the phone.

bug receives the electrical current, it translates the current 4Aintos theradio signals and broadcasts them on radio wavelengths. nvestigators need a receiver for the radio signals. Sometimes they 5Iput a receiver in a van and park it nearby. That way, they can use a bug that transmits radio waves only over short distances.

of the Baranof Hotel, the hotel room used by Allen and Smith when they were lobbying in Juneau, Alaska’s capital.

“I’ll Sell My Soul to the Devil”

The audio and video recordings provided a gold mine of information. In the Baranof Hotel suite, investigators planted a pinhole camera across from Allen’s favorite chair. They recorded video of Allen pulling hundred dollar bills out of his 52


FBI wiretaps revealed that former Alaska state representative Vic Kohring accepted a payoff from executives of Veco, an oil fields services company, in exchange for supporting legislation that favored Veco’s interests.

front pocket and handing them to legislators, along with Allen shushing a legislator with the remark, “let me count first,”20 before he handed the legislator a bribe. The night before the legislature convened its special session on the PPT, the FBI listened in on Kott’s voicemail to Allen, whom he referred to as “Uncle Bill.” Kott says, “Uncle Bill...Things start tomorrow. Just want to get what our 53


instructions are.”21 In another tape, Kott describes what he had to go through to kill the PPT tax bill. “I had to cheat, steal, beg, borrow, and lie. Exxon’s happy. BP’s happy. I’ll sell my soul to the devil,” he brags. “Well, that will stay The number of hours in this room,”22 replies Smith. of videotape the FBI One thing Kott did to delay the recorded in Veco’s suite PPT bill was to hold up the vote on in Juneau’s Baranof Senator Fred Dyson’s abortion bill. Hotel Kott was bargaining with Dyson, trying to convince Dyson (who was not taking bribes) to vote with the oil companies on the PPT. Knowing Dyson to be a strong opponent of abortion, Kott held Dyson’s abortion bill hostage. He hoped to use it as a bargaining chip with Dyson. The FBI recorded Kott saying about the abortion bill, “When Bill Allen [then president of Veco] tells me he’s ready to vote ’er out, then I will vote it out.”23 Thanks to the wiretaps, investigators also indicted and convicted Vic Kohring, who at the time was the chairman of the House Special Committee on Oil and Gas. The FBI recorded Kohring talking to Smith as if the executives of Veco, not the citizens of Alaska, were his employers. On one tape, Kohring gushes, “I was mainly calling just to touch bases with you and Bill and let you know anything that comes along that I can help with, if I can be an information source or if I can lobby on your behalf, if I can consider modifications to legislation or whatever, you please let me know, OK?”24 Kohring later tells Smith, “I wanted you to know I stand by to do anything to help. I know I say that so many times, but I do want to be of assistance and if I don’t hear from you guys I’ll just keep following the course that I do as far as advocating for good things for you guys, including this gas line.”25 A month later, Kohring asked Smith and Allen to help him pay off his $17,000 credit card bill. By the Numbers

at least 400


Putting the Pieces Together

When investigators had enough evidence, they confronted the Veco executives and asked them to testify against legislators. Allen and Smith both agreed. The next day, investigators from the FBI and the IRS took search warrants to the offices of six legislators, to some legislative homes, and to Veco. They checked office files, computer files, and financial records, taking digital photos of everything they needed. The raid gave them the physical evidence and financial documentation they needed in order to complete the case. For example, investigators found $32,200 in cash, neatly stacked in a closet of Kott’s condo. They also found an invoice at Veco from Kott’s hardwood flooring business. Kott had falsified the invoice to make a bribe appear to be a legitimate payment for services rendered. Once investigators had the evidence, they put the pieces of the puzzle together. Painstakingly, they matched the physical evidence—documents and money that they found—with the conversations that they had on tape. For example, Kott and Allen discussed Kott’s falsified invoice the day before the FBI raid. After the raid, investigators could match the audio of the conversation with the actual invoice that they discussed. They developed a timeline for how the corruption unfolded and compared it with legislative records to see whether legislators actually did what Veco executives asked them to do. Later, the jury found the timeline and the evidence very compelling. Three executives pled guilty to bribery, three legislators were convicted and sent to prison, and, as of 2008, the investigation was still ongoing.

The Price of a Used Riding Lawn Mower

The revelation that Veco was bribing Alaska politicians sent waves of shock through the state. It was not that the story was so unusual. News stories about corrupt politicians appear in American newspapers almost every day, and they span the continent. Part of the shock was finding out that Veco’s executives—Smith and CEO Bill Allen—regularly kept 55


Investigators discovered that Veco executives Rick Smith, pictured, and Bill Allen were known to hand out hundred dollar bills to lawmakers in an effort to gain favor and advantage in the state government.

hundred dollar bills in their pockets, so they could hand them out to legislators visiting their hotel suite in Juneau. A few hundred dollars is not a lot of money to risk a jail term for. 56


“The fact of the matter is,” says laskan comic Mr. Whitekeys, “we all want to bribe a politician. We all thought it’d take a Mercedes or a Porsche. Nobody knew you could buy a politician for the cost of a used riding lawn mower.”26 After the investigation became public, Alaska governor Sarah Palin called a new special session of the legislature. She wanted to give legislators a chance to revote on the PPT—“those that are left,”27 she said.

By the Numbers

more than 17,000

The number of phone calls the FBI listened to during the Veco investigation

Operation Tennessee Waltz

The FBI used a similar investigative strategy—one based on wiretaps and surveillance cameras—in an operation they dubbed Operation Tennessee Waltz. The Tennessee Waltz probe began in Memphis in 2005. Investigators there were looking into allegations of kickbacks on contracts at the Shelby County Juvenile Court. While they were investigating that case, they heard references to legislative corruption in Nashville. It was a tough case because they were not sure which legislators were taking bribes, or from whom. They had a few leads, but did not know how large the web of corruption in this case might be. If they made inquiries, or interviewed witnesses, it would start a rumor that the FBI was investigating. Corrupt legislators would be much harder to catch if that kind of rumor started going around. Agents solved the problem by setting up a fake company. They named the company E-Cycle Management and registered it with the Georgia Secretary of State office. Ecycle was supposed to be in the business of recycling old state and local government computers. Agents posing as E-cycle executives offered bribes to legislators to sponsor a bill that would give E-cycle the chance to buy used computers from the state, without having to go through a competitive bidding process.


An investigation into legislative corruption in Tennessee led to the 2007 conviction of former state senator John Ford on charges of accepting bribes from state contractors.


E-cycle’s involvement in the case began when undercover FBI By the Numbers agents persuaded Senator Kathryn Bowers to organize a reception for E-cycle. Right away, Senator John Ford approached an agent (who he Percentage of those conthought was working for E-cycle), victed of bribery who went saying, “You are talking to the guy that makes the deals.” 28 At the to prison for their offenses time, agents did not suspect Ford. between Autumn 2003 and Later, though, they videorecorded Autumn 2004 (the other him as he brought a draft of a bill 50 percent were sentenced to E-cycle and remarked, “This is a to probation) draft, and we can change anything you want to.” 29 Then undercover FBI agent L.C. McNeil counted out fifty $100 bills, and handed them to Ford, who stuffed them in his pockets. A few days later, Ford phoned McNeil again, and McNeil asked if Ford needed anything. Ford replied, “Yeah, send me a little money.”30 By the end of the investigation, Ford took $55,000 in bribes from E-cycle. He also faced separate charges for accepting $800,000 in kickbacks from state contractors. In addition, he was charged with intimidation of a federal witness, because he remarked to undercover FBI agents, “If you’re FBI, I will shoot you and kill you.” 31 Ford was convicted of bribery, but acquitted of witness intimidation, because his defense attorney convinced the jury that Ford was joking when he made his threat. Ford was not the only lawmaker to be convicted in the Tennessee Waltz sting. FBI agents made hundreds of hours of audio and video tape that recorded meetings with at least five different lawmakers and a former legislator. Later, legislators who were caught in the investigation complained that they had been entrapped. Assistant U.S. district attorney Tim DiScenza responded, “It’s the only way they can be investigated. Who’s going to stop them?”32

50%


Tax Evasion

After being charged with receiving kickbacks for steering customers to a friend’s insurance agency, longtime Niles, Illinois, mayor Nicholas Blase faced an additional charge of tax evasion when IRS investigators discovered Blase had not reported the income on his federal tax returns. 60

Bribery investigations pose a special challenge for investigators. It is hard to prove that someone received money as a bribe. The simplest way is to set up a situation to record bribery as it takes place, especially if investigators can videotape officials as they accept cash and put it in their pockets, as in the Alaska corruption cases and the Tennessee Waltz case. Audio tapes of conspirators talking together about the bribery help to convince a jury, too. Sometimes, however, investigators do not have audio or video tapes of bribery. In some cases all they have to go on are statements from witnesses and a pattern of suspicious activity. The IRS takes a special interest in following the paper trail in corruption cases. IRS agents have an interest in bribery cases because bribes constitute an unreported source of income. To get access to a suspect’s financial records, however, they must wait for the undercover phase of a case to be over. Otherwise, the suspect may realize that he or she is being investigated. If that happens, the suspect may hide some of the evidence. Once the undercover work is over, the evidence gathered by the undercover agents helps the IRS agents to establish


Income Tax Evasion Many corrupt politicians are eventually indicted and convicted of income tax evasion, even though it is not easy to collect evidence to prove that a politician accepted a bribe. Even if investigators have videotapes showing a lobbyist handing cash to a politician, the politician can always claim, later, that he or she thought it was a campaign contribution. However, if the money ends up in the politician’s bank account, an IRS investigation can determine whether the money was reported to the government as income. The law requires all income over a certain amount to be reported, because people must pay tax on their income. Failure to report income, in some cases, is a simple mistake or oversight. In other cases, though, people do not report income because they do not want to pay tax on it. This is called income tax evasion. Corrupt politicians cannot report money they received as bribes on their income tax forms, because the admission of income might lead to a bribery investigation. As a result, it can be very helpful to involve the IRS in a bribery investigation. Even if the bribery investigation does not result in enough evidence for a conviction, the IRS investigation may. Charges of income tax evasion are often brought against those involved in bribery or extortion schemes because it’s unlikely that someone would claim money gained illegally as income to the government, even though the law requires all income to be reported.

61


probable cause. Probable cause means that a judge agrees that it is reasonable to think a crime might have been committed. Then the judge issues a search warrant to give agents access to financial records. When the undercover work in a case is over, says IRS special agent Bill Doukas, “they open the cage and let us out.”33 Because IRS agents are involved after the FBI has already done its undercover work, tax charges often follow criminal charges on a case by a year or more. For example, Nicholas Blase, the mayor of Niles, Illinois, was arrested by the FBI in June 2006. He was charged with pressuring Niles residents to buy insurance from a company owned by one of his friends. The friend then sent Blase kickbacks based on a percentage of the insurance people purchased. The charges followed a long FBI undercover investigation. Almost a year later, IRS investigators finished their analysis of Blase’s financial records. They turned the tax counts over to prosecutors, who added six tax counts to Blase’s original indictment. The IRS agents discovered that Blase never reported his more than $420,000 in kickbacks on his federal tax returns.

Cash Flow Analysis

In the early 1980s, two investigators from the IRS Criminal Investigation Division pioneered a new investigative technique called cash-flow analysis. Dennis Czurylo and his partner, William Thullen, realized that bribe-takers tend to put their paychecks and other legal income in the bank. Afraid to put the bribe money in the bank, they instead use it to pay for everyday expenses, such as groceries. Czurylo and Thullen theorized that they could analyze suspects’ spending patterns to note how much cash the suspects took from their checking accounts, what they used it for, and whether the totals made sense for each suspect. Their first test case was Richard LeFevour, a circuit judge in Cook County, Illinois (the Chicago area). Czurylo and Thullen spent months in the basement of LeFevour’s bank, combing 62


through boxes of his canceled checks. By the Numbers They discovered that although LeFevour was married and had six children, he only wrote an average of $22 per week in checks to his local grocery store. Agents then inter- The number of people viewed the grocery store owner, who convicted of bribery told them that LeFevour usually paid between Autumn 2003 for his groceries in cash and that he usually spent at least $120 every week. and Autumn 2004 For the years in question (1978–82), grocery expenditures added up to $20,000 in cash. Next, agents looked at the checks LeFevour had written to Centennial Laundry, which cleaned his judge’s robes. Those payments were also lower than they expected, based on normal laundry rates. Agents visited LeFevour’s retired deliveryman. He remembered delivering the judge’s robes and said LeFevour usually paid in cash. Agents estimated that those cash payments added up to $11,000. Then the agents became interested in one check they found, addressed to a Bridget Connolly. It turned out that she was the family’s maid and was usually paid in cash. Payments to her also totaled $11,000. When agents totaled LeFevour’s expenses, they found that his known currency uses—the things he was spending money on—exceeded his known sources of currency—the money he made legally, in income and investments—by $132,876. The discrepancy alone was not enough to try and convict LeFevour, but it added to a body of evidence. Investigators also recorded some of LeFevour’s conversations with his co-conspirators, for example, which helped to build a case against him. LeFevour was convicted of racketeering, mail fraud, and filing false income tax returns. Later, IRS special agent James Houlihan remarked, “What can you do with cash that we can’t find? Nothing—except maybe take it out to the backyard, dig a hole, and bury it.”34

138

3

CHAPTER

Following the Money

M

itchel Guttenberg had a problem. He owed $25,000 to Eric Franklin, who worked for Bear Stearns. Guttenberg worked at Union Bank of Switzerland (UBS). Both companies are investment banks, companies that employ brokers who buy and sell stocks. Guttenberg thought of a way out of his problem. He met Franklin at Oyster Bar, a restaurant in New York City’s Grand Central Station. Over lunch, he explained his plan. He wanted to pay off his debt by telling Franklin ahead of time whenever UBS stock analysts were about to upgrade or downgrade their position on a particular stock. (An upgrade means the analysts are moving toward recommending a buy, while a downgrade means they are moving toward recommending a sell.) Franklin could respond to Guttenberg’s inside information by buying or selling his own shares of these stocks before the general public did. Guttenberg’s plan had one problem, however. It was illegal. Essentially, Guttenberg was offering Franklin a bribe (forgiveness of Guttenberg’s debt to Franklin) in return for sharing information that is not made available to the general public. Franklin agreed to the deal and for the next five years, he and another broker used Guttenberg’s tips. They garnered more than eight million dollars, simply by buying and selling stocks at just the right time. This type of arrangement is known as insider trading.

Two Years, Max

Franklin and Guttenberg’s conspiracy was unusual, because it lasted five years. According to the Association of Certified

Following the Money

Workers on the floor of the New York Stock Exchange and others involved in trading utilize computers tied to sophisticated systems that track all buying and selling, enabling the Securities and Exchange Commission (SEC) to detect irregular or suspicious trading activity.

Fraud Examiners, corruption schemes rarely last longer than two years. It is hard to hide the evidence of corruption, because it usually leaves a paper trail. The UBS case was investigated by the Securities and Exchange Commission (SEC). The SEC is the U.S. government agency that monitors the stock markets to make sure stocks, or securities, are traded fairly. According to SEC spokesman Scott Friestad, the investigation began “as a routine probe of suspicious high-volume trading prior to the acquisition of Catellus Development.”35 High-volume trading means that there was a flurry of buying and selling. Stock exchanges have complex computer systems that keep track of trends in stock buying and selling. The computer software is set to notify an enforcement


Drug Trials

A

s new industries develop, investors are finding new sources of insider information. This is especially true in the biotech industry. In 2005, Seattle Times reporters broke a story about doctors involved in drug trials who talked to investors about the drugs they were studying. Companies known as matchmakers put investors in contact with doctors who studied the drugs that are about to go onto the market. For $300 to $500 an hour, investors can chat with a doctor who participated in a clinical trial to find out whether that drug worked well or not. Based on that information, investors decide whether to buy or sell stock in the company that manufactures the drug. Currently, it is legal for doctors to sell this information to investors. Doctors fall outside the scope of insider trading laws, because they are selling their opinion about a new drug, not manipulating the rise and fall of stock prices for their own gain. Buying a doctor’s opinion about a drug is not considered bribery, yet. Some doctors make tens of thousands of dollars a year this way. Like other insider information, doctors’ tips can cause a flurry of movement in a stock. For example, in 2002, Isis Pharmaceutical stock prices dropped 20 percent after doctors told analysts that the drug Isis was developing to treat lung cancer did not work. In years to come, legislators may update laws to reflect the changing dynamics of new technology industries. Doctors involved in drug trials can be paid by investors for their opinions on the effectiveness of those medicines; the investors use that information to determine if they should buy stock in the pharmaceutical companies that make the tested drugs.

66

Following the Money

group if the trading of a particular stock By the Numbers exceeds certain parameters—if there is an unusual amount of buying and selling in a given time period. The computer does not notify the SEC since there are plenty of legal reasons for a The percentage of U.S. stock to experience a sudden spurt of Fortune 500 companies high-volume trading. But the computer who were engaged does notify the enforcement division of the stock exchange where the flurry of in bribery of foreign trading took place. Then the staff at officials prior to the the stock exchange keeps an eye on the passage of the FCPA stock. They watch to see if the company makes any announcements, like it is being bought or sold, which would be a reason for the high-volume trading. In this case, Catellus Development announced that it was being purchased, or acquired, by another company. If, right after a trading flurry, the company whose stock is being traded so frantically makes an announcement that affects the value of its stock, the exchange will begin an insider trading investigation. The staff at the exchange wants to make sure the flurry of trading before the announcement was legitimate. They want to be certain that no one who traded stock had prior knowledge that the announcement was coming.

1/4%

Red Flags

At the beginning of the investigation, a securities exchange still may not call in the SEC. At this point, the exchange still does not know if any illegal activity has taken place. There will be plenty of time to phone the SEC later. First, the exchange checks the trading records. Investigators use computer records to generate a list of names, showing what parties were involved in the last minute buying and selling. They also obtain copies of the documents that the company routinely files with the SEC. The SEC documents list the names of the officers in the company and the members of the board of


directors. Any match between the two lists, which shows that a company officer or board member is involved in last minute stock trades, raises a “red flag” with investigators. A red flag is something that catches an investigator’s attention and arouses suspicion. But a The number of red flag, by itself, is not proof that any international bribery wrongdoing took place. investigations Next, the exchange investigators underway in 2007 check to see if any of the people who traded stocks during the suspect period are affiliated with, for example, a broker, a company or agent who does their trading for them. This is the way the exchange determines whether or not it has jurisdiction in a case. If the case involves brokers who are not members of the exchange, the exchange may turn the case over to the SEC. Otherwise, it may investigate internally first.

By the Numbers

more than 150

Phoning the Feds

When a case is turned over to federal authorities (in this case, the SEC), the person being investigated does not know an investigation is underway. Investigators prefer not to notify suspects until they have to, because as soon as a person knows an investigation is happening, he or she, if guilty, may shred documents or look for other ways to interfere with the paper trail. By this stage in an investigation, though, the SEC will have a list of the major players, the people who bought and sold the largest amounts of stock, and copies of their brokerage account statements. The Guttenberg investigation proceeded this way as well. Friestad recalls: We linked those trades to Mr. Franklin and obtained trading records for Q Capital, and Mr. Franklin’s own records for his personal account, and noticed that what they had in common was Morgan Stanley as the

Following the Money

investment banker. We also noticed that a lot of the trading preceded upgrades and downgrades issues by UBS and then the whole scheme began to unravel.36

Voluntary Cooperation

At the beginning of an investigation, the SEC has no power to force anyone to testify about their investments or those of others. Instead, commissioners ask for individuals and corporations to cooperate voluntarily. They start by sending a letter to the company whose stock was traded. The letter lists the major players and asks company executives if they can identify the individuals and explain how they might be connected to the company. Company officials might recognize the names of their lawyers, their accountants, or other affiliates. By explaining these relationships to the SEC, a company saves the investigators hours of work. The next step is to phone the major players and ask them to answer questions about their investments. Sometimes individuals answer questions willingly and voluntarily turn over all the relevant documents. Even when the players cooperate, a court reporter is present to transcribe their testimony, so that if there are questions later about what was said, investigators can refer to the transcript. Other times, individuals wait to talk to the SEC until they are compelled to by a subpoena. A subpoena is a document requiring a person to testify or to produce copies of certain records. When the SEC issues subpoenas, it has begun the second, or formal, stage of its investigation. In both stages of an investigation, though, SEC investigators work mostly with paper. They follow the paper trail—even when the “paper” trail is electronic, in computer files. Unlike FBI investigations of corruption, SEC investigations do not involve undercover work or hidden microphones and cameras. They do not need to because crimes involving stocks cannot help but produce a paper trail. It is impossible to have an off-the-record stock purchase. The whole point of buying a share of stock is to be the owner of record for that share 69


Securities Exchange Commission (SEC) investigators follow an electronic “paper trail” to gather evidence of criminal activity involving the buying and selling of stock.

of stock. Investigators may interview witnesses, but they can often gather all the evidence they need by looking at public documents, such as the company SEC filings or by reviewing documents obtained by subpoena, such as brokerage account statements, telephone records, corporate documents, or documents produced by an auditor (an accountant who reviews a company’s bookkeeping to make sure that it is accurate). 70

Following the Money

The Stock Market

T

o understand insider trading, it is necessary to understand how the stock market works. Stocks are shares in a corporation. When an investor buys a share, he or she provides the corporation with money to expand the business. At the end of the year, the investor should receive a dividend, a percentage of the company’s profits for that year. Publicly held companies are companies with shares that can be bought and sold by members of the public though a stock exchange. A stock exchange is a market for shares in corporations. The United States has three major stock exchanges: the New York Stock Exchange (NYSE), the American Stock Exchange (Amex), and the National Association of Securities Dealers (NASDAQ). The stock averages that are reported on the news are composites of the stock prices of many companies. For example, the Dow Jones is the average value of the stocks of 30 large, industrial companies, such as General Motors, Goodyear, IBM, or Exxon. The S & P 500 is an average of the stock prices for 500 large companies. If a person wants to buy shares of stock, he or she does not have to go to the stock exchange. Instead, one can phone a stockbroker, someone who goes to a stock exchange and buys and sells stock on behalf of others. One can also buy and sell stocks online, using the Internet. Buying and selling stock always creates a paper trail or an electronic trail. That trail is very useful to the SEC when it investigates allegations of insider trading.

Investment bankers and brokers who hope to make money using insider information know that their transactions will be recorded and that the SEC will have access to the records. Sometimes, investment bankers and brokers can still use insider information. They make many small transactions, rather than a few large ones. That way, no single transaction will stand out enough to call attention to itself. Small transactions are less 71


likely to raise red flags. But once a red flag is raised—either by computer monitoring software, by a whistleblower who finds out about a conspiracy and tips off the SEC, or by investigative reporters working for the news media—the SEC is likely to sort out the details. Remembering the Guttenberg case, SEC enforcement director Linda Chatman Thomsen comments, “Some defendants may have thought they were ‘flying under the radar’ by making modest profits on individual transactions, secure in the knowledge that, over hundreds of tips, they would reap millions.”37 In the end, instead of reaping millions of dollars in profits, the conspirators reaped criminal records, several years in prison, and thousands of dollars in civil fines.

Slush Funds

Paper trails, or electronic trails, often lead investigators to slush funds. Slush funds are one of several ways that financial criminals try to obscure their trail. They launder the money by breaking it into small amounts and sending it to multiple accounts. They also hide money in an invoice for a legitimate service by overcharging for the service or by invoicing for a service they never provided. Corrupt officials often create a slush fund, a fund that contains miscellaneous money, if they need money for bribes on an ongoing basis. They can withdraw the money to pay for small expenses that come up from time to time. A slush fund can be legal. Many companies have a small slush fund called petty cash. Petty cash pays for expenses that are too small or trivial to have their own account. Some companies have slush funds that pay for morale-building activities, such as office parties. That kind of slush fund is legal. It is not used to bribe anyone. Slush funds, however, can also be used to hide money that will be used in inappropriate ways. For example, in 2008, the New York City Council put money aside in a slush fund for organizations that did not exist. When council members wanted to support a program without getting approval from the New York mayor, they drew money from one of the 72

Following the Money

Many companies and organizations maintain a small petty cash fund or slush fund to cover minor but legitimate expenses, but these can be abused by those looking to skim or hide money.

nonexistent organizations. This is illegal and is called misdirection of funds. These funds may not be used for bribery, but sometimes they are. Once investigators find a slush fund, they have a key to crack open the case. They follow the money, looking at the slush fund accounts to find out what amounts were transferred to whom and when. Then they go to that account to find out where the money went from there. In 2004, detectives from the British Ministry of Defence raided the offices of Travellers World, a London business. They were auditing the accounts of BAE, a major British defense industry contractor. (BAE frequently works with Lockheed, an American military contractor.) The detectives carried out 386 boxes of documents. They showed that BAE used Travellers World to hold a slush fund account worth 60 million British pounds. According to investigators, BAE used the slush fund to bribe Saudi Arabian officials. 73


BAE wanted Saudi Arabia to buy 150 military planes. They labeled the slush fund “Accommodation services and support.” Investigators said it was used to bribe Prince Turki bin Nasser of Saudi Arabia. Some of the money went for services, such as hotel accommodations, limousines, and entertainment. Goods and services can be bribes, but they are classified as in-kind bribes. Investigators give a value to in-kind bribes, using the amount of money paid for them or the amount that the goods or services are worth on the open market. The BAE slush fund did not only pay for in-kind bribes. Using account ledgers, travel itineraries, and other records; detectives documented 306 major payments, and many additional smaller payments, made through Travellers World to Prince Turki. The payments were broken up to make them less noticeable. They were sent through bank accounts in several countries, including Prince Turki’s Bank of America account in the United States. BAE officials might have hoped that by using a slush fund attached to a different company and by breaking their payments into small increments, they would not be noticed by investigators. Once detectives looked at BAE accounts, however, the paper trail, and the electronic trail, led them directly to Prince Turki. The BAE case did not lead to any convictions, however. Great Britain dropped the case for reasons of national security. The decision was extremely frustrating to investigators who worked on the case. “The idea of discontinuing the investigation went against my every instinct as a prosecutor,” lamented Robert Wardle, the director of Britain’s Serious Fraud Office. “I wanted to see where the evidence led.”38

Bribes across Borders

The BAE case was not only a violation of British laws but also of international anti-bribery conventions. Anti-bribery laws are a recent development in world politics. Even in the United States, these laws are only a few decades old. Bribing American officials has always been illegal. However, only since 1977 has it been illegal 74

Following the Money

for American companies to bribe officials in foreign countries. It was in 1977 that the United States passed the Foreign Corrupt Practices Act (FCPA). Prior to the passage of the FCPA, bribing foreign officials was common. In many European countries, until the late 1990s and the early 2000s, bribes to foreign officials were tax deductible as a business expense. For about twenty years after the United States passed the FCPA, the law was one of the strictest anti-bribery laws in the world. It stood as a model to other countries who were revising their own laws. Meanwhile, American executives complained that their companies were at a disadvantage in the global marketplace, because overseas companies could bribe foreign officials. Then, in 1997, the United States and thirty-three other countries signed an anti-bribery agreement called the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. (The agreement was instituted by the Organisation for Economic Co-operation and Development, an organisation that helps governments work together to solve economic problems in which they share a common interest.) Each country agreed to make it a crime to bribe foreign officials.

American company Halliburton found itself in the middle of an investigation into an international bribery scheme when it acquired the TSKJ consortium, which had used a slush fund to send payments to Nigerian officials as part of a business deal in that country.

75


FCPA cases pose a special challenge to investigators. They are investigated using the same techniques the SEC uses to investigate insider trading. The principle of following the money, using a paper trail or an electronic trail to verify the accounts from which money is withdrawn and accounts into which it is deposited, still applies. But FCPA cases are much more complex. They are so complex, in fact, that the FBI has a special team devoted to FCPA cases. These cases often take investigators from an account in one country to an account in another. Investigators need to work with their counterparts in other countries. The investigation often takes investigators from a company to its subsidiaries—the companies that it owns—or to its umbrella company—that company it is owned by. When one company buys another company, the FCPA requires the purchaser to check the accounting of the company it plans to buy and keep checking the accounting as time goes on. These checks are called internal controls. If a company’s subsidiary is involved in bribery, the parent company can be held partially responsible, even if it did not know about the bribery. Investigators trace the links between companies to find out who knew what, when they knew it, and whether proper accounting procedures were followed. In addition to checking company accounts, they comb through its legal documents and contracts and decipher handwritten notes taken by company executives at their meetings. For example, the SEC and the U.S. Department of Justice began investigating Halliburton, an oil field service company, after French officials contacted them regarding their own investigation. In 2002, shortly after France’s anti-bribery laws were passed, French investigators were questioning an official from Technip, a French oil field services company. He told them that Technip’s partner, TSKJ, was using a slush fund to send payments to Nigerian officials. French investigators traced the slush fund to Tri-Star Investments. They thought that TSKJ was using Tri-Star to funnel bribes to Nigeria, so they documented $166 million paid to Nigerian officials this way. They confiscated documents from TSKJ and found handwritten notes 76

Following the Money

from a meeting in which officials discussed the use of “secret” funds and “open” funds. The notes raised the possibility of bribing officials so that TSKJ could win the contract for Nigeria’s twelve billion dollar liquefied natural gas project. In 2004, French investigators turned their evidence against TSKJ over to their counterparts in the United States, because TSKJ is a subsidiary of Halliburton, an American company. The U.S. Department of Justice and the SEC both began investigations. Halliburton did not own TSKJ at the time of the alleged bribery. But an investigation was undertaken to find out if Halliburton knew about the bribery when it bought TSKJ and if company officials should have tried harder to uncover bribery before purchasing the company. Investigators had to determine whether Halliburton’s internal controls were strict enough. Often, investigators get tips from companies that discover cases of bribery during their internal review process. Many companies realize it is safer to turn such information over to the SEC immediately, rather than try to hide it. If they do so, they are less likely to be prosecuted. This is what defense contractor Lockheed Martin did in 2003. Lockheed hoped to buy Titan, a military contractor with a strong information- technology department. As they reviewed Titan’s accounts, Lockheed’s executives realized that Titan was bribing officials in Benin (in West Africa). Lockheed turned the case over to the SEC and chose not to buy Titan. Although FCPA cases are complex, investigators remain committed to mapping out the connections and tracing the evidence to its source. According to retired FBI assistant director Chip Burrus: We live in an age where global commerce is enmeshed and interconnected like never before. There are a ton of U.S. businesses nowadays that have plants or offices in distant countries...or that outsource their operations overseas...or that buy and sell products and services overseas. We can’t have a level playing field if there’s all kind of chicanery going on beyond our borders.39 77

CHAPTER

Stinging a Cybercriminal

I

n 2006, two teenagers hacked into computers belonging to the online social networking site MySpace. The Web site was designed to allow users to remain anonymous, but Shaun Harrison and Saverio Mondelli developed software that allowed them to track the email and IP addresses of surfers who visited their MySpace page. (An IP address is an Internet address for a specific computer.) They started their own Web site, where they offered the software for sale. They charged $29.95 for it. At first, MySpace technicians found ways to block the software. Next Harrison and Mondelli developed a version that they claimed was “unbreakable.” They bragged that they already had 85,000 registered users using the first version. They threatened to release the new version unless MySpace paid them a “consulting fee.” They wanted $150,000.

A Long Distance Crime

What Harrison and Mondelli did was extortion. It was the Internet equivalent of mobsters demanding protection money from businesses in their neighborhoods. Crimes like this one, in which criminals attack through computers and deliver threats by email, are becoming more common. Frequently hackers threaten to reveal security flaws in a Web site or to shut down the Web site. They may encrypt the data on the victim’s computer and send an email saying, “Pay up or you’ll never see your data again.”40 Occasionally, they send emails threatening to kill the victim if he or she does not pay. They may include personal information they have gathered about the victim, such as his or her home address or photos of the victim and the victim’s family.


Crimes committed by hackers or those who issue threats or scams via email are increasingly common as the use of technology expands.

Cybercriminals often feel a sense of security. They may think they are beyond the reach of law enforcement, because they are physically located far from the scene of the crime—in this case, the victim’s computer. Some cybercriminals attack their victims from a different country. Companies in the United States are regularly attacked by hackers from Eastern Europe and Africa. Because they never see their victims in person, cybercriminals may feel as though what they are doing is not entirely wrong. They may view cybercrime as more like a business deal than like mugging someone on the street. Harrison and Mondelli may have kidded themselves that they were only using hardball tactics to get MySpace to employ them as consultants. Whatever they called it, though, it was actually extortion. It would not have been extortion if they had gone to MySpace and applied for jobs, though they would still have been guilty of a cybercrime for hacking into the MySpace computers. What made their act extortion was that they threatened MySpace. They demanded that MySpace pay them not to carry out their threat. Threatening to harm someone or their property if they do not give up their money is a crime, whether it is done at gunpoint or by email.


A Sting Operation

At first MySpace went to court and got a cease-and-desist order. They emailed it to the hackers. (At this point, they did not know who the hackers were.) But Harrison and Mondelli emailed back, saying, “We will neither cease nor desist.”41 So MySpace (located in Beverly Hills, California) went to the Los Angeles District Attorney’s office. They wrote to the hackers, agreeing to pay the consulting fee. Harrison and Mondelli flew to Los Angeles to pick up the money. There, they were met by what they thought were MySpace employees. But the “MySpace employees” who met them were really undercover detectives from the U.S. Secret Service and the Los Angeles District Attorney’s Bureau of Investigation. At that point, Harrison and Mondelli were arrested. The anonymity of the Internet protects hackers, but also makes it easier to catch them in a sting operation like the MySpace one. It can be difficult to determine the identities of Teen hackers Saverio Mondelli, left, and Shaun Harrison appear in court in February 2007 to face charges in their extortion plot against the operators of MySpace.com.

80


Online gambling Web sites are common targets of hackers who threaten to crash the site unless their demands for a payoff are met; site operators have been known to comply rather than risk losing business.

cyberextortionists, because they usually use anonymous emails and cover their tracks by creating cybertrails that lead to computers other than their own. The first step in an investigation may be to have the victim offer to pay and suggest a location for making the payoff. Often, neither victim nor extortionist knows what the other looks like. So investigators can pose as the victim, hand over the money, and arrest the hacker when he or she accepts the money.

Web site under Attack

Unfortunately, not all hackers are willing to meet their victims, or detectives posing as their victims, in person. In November 2003, Mickey Richardson received an email warning, “Your site is under attack.”42 The email said that if Richardson, who runs an online gambling Web site in Costa Rica (where gambling is legal), wired the extortionists $40,000, using a Western Union telegraph, then his site would be safe for the next year. If not, the site would crash every weekend for at least twenty weeks. Richardson was preparing for the winter season, which meant he expected to take bets on professional and college football and basketball. He knew that he would, as the 81


By the Numbers

extortionists pointed out, lose tens of thousands of dollars in bets if his Web site, BetCRIS, was down every weekend. But he did not take the email seriously at first. “We kind of fluffed it off,”43 he says now. He asked his network adminThe number of cybercasistrator, Glenn Lebumfacil, what he es investigated by the thought. “I said—God, in hindsight, FBI as part of Operation what an idiot—I said, ‘we should be safe. Cyber Sweep I think our network is nice and tight,”44 Lebumfacil remembers. Because Richardson had been extorted before, his network was protected against attacks with the latest software made for that purpose. Yet when the attack began that weekend, his protection software lasted only ten minutes. His Web site crashed. His ISP (Internet Service Provider) server crashed. His ISP was getting its Internet service from a larger ISP, and that ISP server crashed too. In response, the ISP null-routed BetCRIS traffic. Null-routing is how ISPs often respond to attacks on their Web sites. They collect the traffic headed for a site and send it into nowhere, instead of sending it to the Web site. This frees the ISP from the traffic jam. When a Web site is null-routed, though, it is down, meaning it isn’t available to its customers. A few hours into the attack, Richardson received another email. It said, “I guess you have decided to fight instead of making a deal. We thought you were smart...You have 1 hour to make a deal today or it will cost you $50K to make a deal on Sunday.”45

more than 100

A Wave of Attacks

The attack on BetCRIS was part of a wave of online attacks against gambling Web sites. It started in late 2003 and continued into 2004. Eventually, hackers moved on to other kinds of businesses, such as online payment services, financial service companies, and foreign currency exchanges. However, any business can be vulnerable. Security expert W. Scott Creasman warns: 2


Companies don’t realize how much they rely on technology to run their businesses. If you’re in the hotel business, for example, you’re not a tech company, but you need computer systems to do things like take reservations and store credit card information. The security of your network means a lot.46

By the Numbers

10,000 to 100,000 Typical botnet army sizes

Nobody is certain how common attacks on business Web sites are. In one study by Carnegie Mellon University, 17 percent of small and midsize companies reported having been targeted by extortionists. A study by San Francisco’s Computer Security Institute reported that 90 percent of companies they queried had logged a security breach to their Web sites in the previous year. About 80 percent of those security breaches had led to financial losses of some sort, though not all were caused by cybercrime. Experts say that most cyberextortion is never reported, and one-third of businesses opt to pay the extortionists rather than risk having their Web sites down for an extended period of time.

The Traffic Jam

Mickey Richardson considered paying BetCRIS’s extorters. He had given in to a previous extortion attempt, paying $500 in e-gold. But at the time, Richardson had viewed payment as a way to buy time to get protection software installed. The latest attempt, though, had crashed right through the protection software. Now BetCRIS was suffering through a DoS attack. A DoS attack is a denial-of-service attack. It is a virtual traffic jam. Hackers flood the Web site server with requests, which the server denies. The server gets so busy denying the invalid requests that it cannot respond to legitimate requests from Web site customers. 3


A Zombie Network

It takes thousands of computers to flood a Web site with so much traffic that it crashes. Hackers do not have that many computers at their disposal in their homes or businesses. Instead, they recruit computers that they make contact with via the Internet. Usually they recruit the computers of home and office broadband users. They plant script, a few lines of code or instructions, on computers that they recruit around the world. They use viruses, phishing schemes, and spyware to plant the script. The computers that hackers recruit this way are called zombies, or bots, because the script planted in them allows them to generate traffic automatically. The owners of these computers may never know that their computers are being used in a crime. One security consultant, out of curiosity, hooked up an unprotected computer, one that did not have security software or a firewall running, to the Internet to see what would happen. The unprotected computer was recruited into a zombie network within three minutes. The more zombies hackers have within their networks, the more traffic they can unleash on Web sites they attack. Hackers are able to infiltrate multiple computers, sometimes without their owner’s knowledge, to create zombie networks that they can command to overload targeted Web sites, causing them to crash.

84


With several hundred computers, they can produce 100 MB (megabytes) of traffic, enough to make a small network go down. With 10,000 computers, hackers can generate a 1 GB (gigabyte) attack. An attack this large will crash almost any site that is not running anti-DoS software and some sites that are. In 2003, when BetCRIS was attacked, a one gigabyte attack was very large. A few years later, hackers could assemble much larger bot armies. In 2006, a twenty-year-old hacker assembled a botnet using more than 50,000 computers. He disrupted networks at

Becoming a Computer Systems Analyst

J

ob Description: A computer systems analyst analyzes computer programs in order to solve problems. Police departments, the FBI, the IRS, the SEC, and other government agencies employ computer systems analysts to follow the electronic trail in cases and to determine how programs such as those used in cyber-extortion work. The FBI has regional computer forensics laboratories around the country, each of which is devoted to analyzing digital evidence. Education: Aspiring computer systems analysts must complete a bachelor’s degree in a technical field, such as computer science or applied mathematics. They must also plan to continue studying computer science throughout their lives, since computer technology is constantly changing. Qualifications: There is no certification for computer systems analysts, but employers look for analysts who have experience solving difficult problems on the job. Additional information: In addition to technical expertise, a computer systems analyst must be able to work well as part of a team. He or she must be able to think logically and have broad general knowledge about technology. Salary: $53,000 to more than $90,000 per year

85


FBI agent Doris Gardner is one of a growing group of government and police officials who specialize in the examination of digital evidence behind cybercrimes.

hospitals, schools, and the U.S. Department of Defense for more than a year before investigators tracked him down and arrested him. He has since been sentenced to three years in prison.47

The Investigation

When BetCRIS was attacked, Richardson tried two approaches for defending the site. He called in security expert Barrett Lyon to 86


develop software to defend the site. And By the Numbers he reported the extortion to the National Hi-Tech Crime Unit at Scotland Yard (NHTCU) in Great Britain. NHTCU wanted to try a simple sting operation. They advised Richardson to wire two The percentage of compayments, of a few thousand dollars each, puters hooked up to the to Western Union offices in Eastern Internet that have been Europe (where they believed his extortdrafted into botnet armies ers were located). Then they staked out the Western Union offices and waited to see who would show up to take the cash. The extorters did not take the bait. Nobody showed up at Western Union. While Scotland Yard worked on its end of the case, Lyon worked on his. He planned to build up the site until it was big enough to absorb an extra gigabyte of traffic. He accomplished that, but BetCRIS was still overwhelmed. It turned out the extortionists were using a zombie army of more than 20,000 computers. Richardson feared he would go out of business. Lyon recalls:

about 7%

The attack went to 1.5Gb, with bursts up to 3Gb. It wasn’t targeted at one thing. It was going to routers, DNS servers, mail servers, websites. It was like a battlefield, where there’s an explosion over here, then over there, then it’s quiet, then another explosion somewhere else. They threw everything they had at us. I was in shock.48 The traffic jam at the ISP made other Web sites crash too. Richardson began to get phone calls. “I’m getting calls from friendly competitors,” he remembers, “saying, ‘Look, Mickey, we paid. Just pay. We’re going down because of you.’”49 Finally, Lyon built BetCRIS up until it could withstand a six gigabyte attack. But the attack held steady at its previous levels. And then, one day, it stopped. Richardson had not given in to the extortion, but he had lost more than a million dollars in revenue. “It was worth it,” he says. It was stressful, though. “I just didn’t know it would take a couple years off my life.”50


Turning the Tables

The DoS attacks had stopped, but Lyon was not finished. “It became a personal vendetta to track these guys down,” he says.51 He decided to hang out in Internet forums frequented by hackers. Hackers like to brag about their exploits, so he hoped he could find someone bragging about attacks on gambling sites. First, though, he checked with the police. “I asked some law enforcement people, ‘Is this illegal, for me to talk to them?’

Cybercrimes

C

yberextortion is just one kind of cybercrime. But there are many other kinds of cybercrime as well, including phishing, criminal spam, hijacking computer accounts, credit card fraud, and identify theft. Many cybercrimes are attempts to get credit card information from individuals. Credit card numbers can be used to order goods online, which can then be resold. Identity theft is often used to apply for credit cards in someone else’s name. Large credit card bills can then be run up (and the goods that are bought can be sold), and the person whose identity was stolen must deal with the bills. Phishing is one way to get private financial information from people. The phisher sends out an email that claims to be from the person’s bank or credit card company, asking for the individual to follow a link to update the account. The link does not go to the person’s bank or credit card company, though. Instead, it links to a phony Web site made to look like the bank or credit card company. If the individual does not realize that the Web site is phony, he or she may type in private information, including social security numbers, credit card numbers, and passwords. The FBI participates in many cybercrime task forces across the country. At any given time, there are more than 100 cybercrime investigations underway. The FBI estimates that there have been more than 870,000 victims of cybercrime as of 2008. 88


The growth of computer technology has created new means of both committing and investigating crimes.

And they’d tell me, ‘No, but we can’t help you or tell you what to say. However, if you did want to say something along these lines, that would be very interesting to us.’”52 Lyon and Dayton Turner, an engineer from another gaming site that had been through extortion, went undercover together. They posed as a hacker called Hardcore, and spent months chatting with extortionists in online chat rooms. Meanwhile, they kept logs of their chats, sharing the logs with the NHTCU and the FBI. Eventually, they found the hacker who had attacked BetCRIS. They persuaded him to share a file with them. Turner used the file transfer connection to trace the hacker’s IP address. Then he traced that to a broadband line in Russia. Eventually, the hacker (whose name was Ivan) 89


logged onto a chat room using his real domain name. Lyon and Turner checked the domain registration, and found Ivan’s last name, address and phone number. They promptly turned it over to the NHTCU. The NHTCU asked Russian authorities for help, and Ivan and two collaborators were arrested.

Operation Cyber Sweep

Because cybercrime has become so common, the FBI opened a new operation aimed at defeating it. It is called Operation Cyber Sweep. Not all the crimes investigated as part of Operation Cyber Sweep are extortion cases, though many are. Some are cases of property theft, identity theft, or stalking. In one of the most famous Operation Cyber Sweep cases, a hacker claimed he was not trying to commit a crime at all. Rather, he was trying to help the government. Brett O’Keefe, the president of ForensicTec Solutions, a computer security company, illegally entered government computers. He hacked into the U.S. Department of Defense, NASA computers, and the Web site of the Department of Energy. While he was there, he copied sensitive files. Then he took the files to the Washington Post. O’Keefe said that he was trying to uncover security flaws to motivate the government to fix them. The day after The Washington Post published the article, investigators from the FBI and the Army’s Criminal Investigative Division searched O’Keefe’s office. They began a yearlong investigation, working together with the San Diego Regional Computer Forensics Laboratory, NASA, the Department of Energy, and the U.S. Attorney’s office. It might seem as though there was little to investigate, since O’Keefe announced his crime in the newspaper. In the O’Keefe investigation, though, investigators needed to determine how much the security of government computers was compromised. They could not take O’Keefe’s word that he had only copied certain files, and not others, or that he had only taken the files to the Washington Post and not to foreigngovernments or to criminal organizations. They wanted todetermine whether 90


ForensicTec had plans to extort the government or to extort private businesses. They also had to find out who else was involved in O’Keefe’s hacking. Ultimately, they arrested two other employees of ForensicTec. They charged all three with conspiracy to access military, government, and private-sector computers.

By the Numbers

100,000 The number of computers drafted into botnet armies every month

A Real Crime

Many hackers do not fully realize that they have done something wrong when they engage in a cyber-crime. Christopher Maxwell, the twenty-year-old who assembled the 50,000computer botnet army, described what he was doing as if it were more of a game. He said he was in an informal contest with two other hackers he met in a chat room. They were competing to see who could put adware onto more computers. “I just kept getting better and better at what I was doing,” he said, tearfully. “I never stopped to think about the consequences.”53 Maxwell was not at the hospital whose computers he sent into turmoil, so he did not see the effects that his actions were having on patients. Similarly, company officials who bribe politicians and gang leaders who extort bookies and drug dealers may view their own actions as business as usual. They may not see the harm. Fortunately, their lack of perspective makes it likely that they will make little effort to conceal their activities. Hackers often brag about their actions. Business leaders tend to crow about their ability to control votes in the legislature. This lack of perspective makes it easier for law enforcement officers to track them down. It may take months of undercover work and hundreds of hours of evidence analysis, but eventually the law catches up with blackmailers, corrupt officials, and extortionists.

1

Notes Chapter 1: Taking Unfair Advantage

8. Quoted in Derrick Blackley. “License for Bribes Paved Way for Ryan Verdict: Convictions Follow Years of Legal Twists 1. Robert Mayer, in email to the author, and Turns.” CBS2 Chicago, April 17, March 20, 2008. 2006, http://cbs2chicago.com/politics/ George.Ryan.Larry.2.327151.html. 2. Rich Davies, in interview with the author, March 6, 2008.

Chapter 2: Exposing a Secret Crime 3.

4.

5.

6.

Chapter 3: Spying on the Mob

9. O’Neill, Gerard, Dick Lehr, and Kevin Cullin. “New Team, Tactics Hastened Quoted in “The Story That Started It Whitey Bulger’s Fall.” Boston Globe, All.” ABC News, April 7, 1998, http:// March 5, 1995, p. A1. abclocal.go.com/wls/story?section= 10. Quoted in Gerard O’Neill, Dick Lehr, news/local&ID=5591549 and Kevin Cullin. “New Team, Tactics Quoted in “The Story That Started It Hastened Whitey Bulger’s Fall.” Boston All.” ABC News, April 7, 1998, http:// Globe, March 5, 1995, p. A1. abclocal.go.com/wls/story?section= 11. Quoted in Gerard O’Neill, Dick Lehr, news/local&ID=5591549 and Kevin Cullin. “New Team, Tactics Quoted in Susie Gran. “FBI Investigating Hastened Whitey Bulger’s Fall.” Boston Possible Corruption.” Albuquerque Globe, March 5, 1995, p. A1. Tribune, Jul y 11, 2006, htt p:// www.abqtrib.com/nw_local_state_ 12. Quoted in Mitchell Zuckoff. “FBI in government/article/0,2564,ALBQ_ Denial as Bulger Breaks Drug Pact in 19859_4838760,00.html. Southie.” Boston Globe, July 23, 1998, p. A1. Quoted in Steve Terrell. “Jury Indicts

Aragon in Alleged Kickback Scheme.” 13. Quoted in “Whitey Eludes Snares New Mexican, March 30, 2007, http:// Set by Troopers, DEA.” Boston Globe, freenewmexican.com/news/59414 September 20, 1988, http://www.boston .html. .com/news/packages/whitey/globe_ stories/1988_the_bulger_mystique_part_ 7. Rich Davies. Interview with the author, 3_sidebar.htm. March 6, 2008. 2

Notes

14. Quoted in “Whitey Eludes Snares Set by 10, 2007, Posted at Anchorage Daily News Troopers, DEA.” Boston Globe, September Web site, http://community.adn.com/ 20, 1988, http://www.boston.com/news/ adn/node/111381. packages/whitey/globe_stories/1988_the_ 21. “FBI Surveillance Audio: Pete Kott Trial.” bulger_mystique_part_3_sidebar.htm. Anchorage Daily News, September 12, 15. Quoted in Gerard O’Neill, Dick Lehr, 2007, http://community.adn.com/adn/ and Kevin Cullin. “New Team, Tactics node/110527. Hastened Whitey Bulger’s Fall.” Boston 22. “FBI Surveillance Audio: Pete Kott Trial.” Globe, March 5, 1995, http://boston Anchorage Daily News, September 12, .com/news/packages/whitey/globe_ 2007, http://community.adn.com/adn/ stories/1995/0305_new_team_tactics_ node/110527. hastened_whitey_bulger_s_fall.htm. 23. “FBI Surveillance Audio: Pete Kott Trial.” 16. Joseph Pistone. Testimony before the Anchorage Daily News, September 12, U.S. Senate Permanent Subcommittee 2007, http://community.adn.com/adn/ on Investigations of the Committee on node/110527. Governmental Affairs, 1988, http://www .americanmafia.com/Pistone_Testimony 24. “FBI Surveillance Audio: Vic Kohring Trial.” Anchorage Daily News, October .html. 26, 2007, http://community.adn.com/ 17. Quoted in Chris Summers. “Movie adn/node/112436. Mobsters Face the Music.” BBC News, April 19, 2004, http://news.bbc.co.uk/2/ 25. “FBI Surveillance Audio: Vic Kohring Trial.” Anchorage Daily News, October hi/americas/3554111.stm. 26, 2007, http://community.adn.com/ adn/node/112436. Chapter 4: How Much for a

Politician?

26. Quoted in Karl Vick. “‘I’ll Sell My Soul to the Devil’: Corruption Scandals 18. “Audio: Kott Political Corruption Trial Involve Alaska’s Biggest Political Names.” Testimony and Surveillance Recordings.” Washington Post, November 12, 2007, Anchorage Daily News, September 12, p. A01. http://www.washingtonpost.com/ 2007, http://community.adn.com/adn/ wp-dyn/content/article/2007/11/11/ node/110527 AR2007111101585.pf.html. 19. Quoted in Richard Mauer. “Federal Agents Raid Legislative Offices.” Anchorage Daily 27. Quoted in Karl Vick. “‘I’ll Sell My Soul to the Devil’: Corruption Scandals News, September 5, 2006, http://dwb.adn Involve Alaska’s Biggest Political Names.” .com/news/politics/fbi/story/8428723 Washington Post, November 12, 2007, p-8036832c.html. p. A01 . http://www.washingtonpost.com/ 20. Quoted in Nicholas Marsh. “Opening wp-dyn/content/article/2007/11/11/ Statement.” Pete Kott Trial, September AR2007111101585.pf.html. 3


28. Quoted in Marc Perrusquia. “John http://www.time.com/time/nation/ Ford, Other Lawmakers Charged with article/0,8599,159-5967,00.html. Taking Bribes in FBI’s Tennessee Waltz.” 36. Quoted in Adam Zagorgin. “More Commercial Appeal, May 27, 2005, http:// Insider Trading Charges?” Time, March www.commercialappeal.com/news/2005/ 5, 2007, http://www.time.com/time/ may/27/john-ford-other-lawmakersnation/article/0,8599,159-5967,00.html. charged-with-taking-in/?printer=1/. 29. Quoted in “Tape Shows Ex-Tennessee 37. Quoted in Brooke Masters. “ Wall Street Employees Among 13 on Insider Lawmaker Taking FBI Money: Said He Trading Charges.” Financial Times, Would Help Pass Legislation for Fake March 2, 2007, http://www.ft.com/ Company.” (Burlington, NC) Timescms/s/0/5cfa376c-c864-11db-9a5eNews, April 4, 2007, p. C7. 000b5df10621.html?nclick_check=1. 30. Quoted in “Tape Shows Ex-Tennessee Lawmaker Taking FBI Money: Said He 38. Quoted in David Leigh and Rob Evans. “BAE: Secret Papers Reveal Threats Would Help Pass Legislation for Fake from Saudi Prince.” The Guardian, Company.” (Burlington, NC) TimesFebruary 15, 2008, http://www.guardian News, April 4, 2007, p. C7. .co.uk/world/2008/feb/15/bae.armstrad 31. Quoted in Daniel Hair. “Corruption in e?gusrc=rss&feed=networkfront. Tennessee.” Conservative Voice, August 29, 2006, http://www.theconservativevoice 39. Federal Bureau of Investigation. “Bribes .com/article/17795.html. Beyond the Border: Stemming the Export of Corruption.” February 5, 32. Quoted in Woody Baird. “FBI Tapes 2007, http://www.fbi.gov/page2/feb07/ Shown Again at Trial.” Harrison Daily fcpa020507.htm. Times, April 25, 2007, p. 9A. 33. Quoted in Rosalind Rossi. “IRS ‘Paper Dogs’ Put the Bite on Corruption: Agents Adept at Tracking Cash Trails of Targets.” Chicago Sun-Times, February 17, 1991. 34. Quoted in Rosalind Rossi. “IRS ‘Paper Dogs’ Put the Bite on Corruption: Agents Adept at Tracking Cash Trails of Targets.” Chicago Sun-Times, February 17, 1991.

Chapter 6: Stinging a Cybercriminal 40. John Leyden. “ Virus Writers Get into Extortion.” The Register, April 21, 2006, http://www.theregister .co.uk/2006/04/21/kaspersky_malware_ trends_update/.

41. Quoted in Scott Berinato. “How a Bookmaker and a Whiz Kid Took on an Extortionist—and Won.” CSO, November 22, 2003, http://www.csoonline.com/ 35. Quoted in Zagorgin. “More Insider read/050105/extortion.html. Trading Charges?” Time, March 5, 2007,

Chapter 5: Following the Money

Notes

42. Quoted in Scott Berinato. “How a 48. Quoted in Scott Berinato. “How a Bookmaker and a Whiz Kid Took on an Bookmaker and a Whiz Kid Took on an Extortionist—and Won.” CSO, November Extortionist—and Won.” CSO, November 22, 2003, http://www.csoonline.com/ 22, 2003, http://www.csoonline.com/ read/050105/extortion.html. read/050105/extortion.html. 43. Quoted in Scott Berinato. “How a 49. Quoted in Scott Berinato. “How a Bookmaker and a Whiz Kid Took on an Bookmaker and a Whiz Kid Took on an Extortionist—and Won.” CSO, November Extortionist—and Won.” CSO, November 22, 2003, http://www.csoonline.com/ 22, 2003, http://www.csoonline.com/ read/050105/extortion.html. read/050105/extortion.html. 44. Quoted in Scott Berinato. “How a 50. Quoted in Scott Berinato. “How a Bookmaker and a Whiz Kid Took on an Bookmaker and a Whiz Kid Took on an Extortionist—and Won.” CSO, November Extortionist—and Won.” CSO, November 22, 2003, http://www.csoonline.com/ 22, 2003, http://www.csoonline.com/ read/050105/extortion.html. read/050105/extortion.html. 45. Quoted in Scott Berinato. “How a 51. Quoted in Scott Berinato. “How a Bookmaker and a Whiz Kid Took on an Bookmaker and a Whiz Kid Took on an Extortionist—and Won.” CSO, November Extortionist—and Won.” CSO, November 22, 2003, http://www.csoonline.com/ 22, 2003, http://www.csoonline.com/ read/050105/extortion.html. read/050105/extortion.html. 46. Quoted in Jenny Davis. “Cybercrime 52. Quoted in Scott Berinato. “How a Bookmaker and a Whiz Kid Took on an Fighters: Companies Have More Legal Extortionist—and Won.” CSO, November Weapons to Defend Against Attacks 22, 2003, http://www.csoonline.com/ on Their Computer Systems.” Wiggin read/050105/extortion.html. and Dana, July 31, 2003, http://www. wiggin.com/spotlight/news_sample 53. Quoted in David Bowermaster. “Botnet .asp?ID=7573812003. Hacker Sentenced to Three Years.” 47. David Bowermaster. “‘Botnet Hacker Seattle Times, August 26, 2006, http:// Sentenced to Three Years.” Seattle seattletimes.nwsource.com/html/ Times, August 26, 2006, http:// localnews/2003226994_botnet26m.html. seattletimes.nwsource.com/html/ localnews/2003226994_botnet26m .html.

Glossary blackmail: An attempt to force a person money laundering: Transferring monor organization to make a payment by threatening to expose sensitive information if the payment is not made.

ey from place to place and from one form to another to make money from an illegal source appear to be from a legal source.

bribery: An attempt to secure illegal influ- racket: A business or organization formed ence over an official by paying a bribe.

conspiracy: An agreement between several individuals to work together to commit crimes.

extortion: A threat to harm an individual if a payment is not made.

indictment: A formal accusation of a felony crime, issued by a grand jury after hearing evidence presented by a prosecutor.

to make money from illegal activities, which could include blackmail, extortion, bribery, violent crimes, etc.

racketeering: Being involved in an

illegal racket. For example, members of the Mob are often convicted of racketeering.

slush fund: A bank account used to hold money for miscellaneous purposes, which can be legal or illegal.

informant: A member of a conspiracy sting: An operation in which a suspect is who agrees to provide information to investigators.

IP address: Internet Protocol address.

The Internet address of a particular computer.

set up, such as when a blackmail victim agrees to meet the blackmailer to hand over money, but brings investigators to the meeting instead.

surveillance: Watching a suspect or location.

ISP: Internet service provider. undercover: Work that involves taking kickback: Money paid to a public official on a different identity to infiltrate a or to an official working for a private company from a contract that the official awarded to a particular organization or company.

lobbyist: A person who influences politi-

cians to make decisions favorable to the lobbyist’s organization.

criminal organization.

wiretap: A method for listening to a suspect’s phone conversations.

For More Information Books

the FBI, information about FBI training, links to the FBI Top Ten Most Wanted List, tips on preventing and avoiding crime, and the FBI kids’ pages.

David Haugen, ed. Is the Mafia Still a Force in America? Detroit: Greenhaven Press, 2006. A series of essays arguing that the Mafia is, or is not, still an important part Mark Kluis, et al. “What in the World Is Going On.” Newspapers.com. (http://www of American crime. .newspapers.com/index.htm.) Contains Mark Grossman. Political Corruption in links to newspapers all over the country America: An Encyclopedia of Scandals, and around the world. Newspapers are Power, and Greed. Santa Barbara, CA: an excellent source of information about ABC-CLIO, 2003. An encyclopedia of blackmail, extortion, and bribery. corruption, including entries on many of the most famous corruption cases in Office for Victims of Crime. “Research and Statistics about Victims of Crime.” American history, such as Watergate, Department of Justice. (http://www.ojp ABSCAM, and Teapot Dome. .gov/ovc/researchandstatistics.htm.) The Alexandra Addison Wrage. Bribery and U.S. DOJ’s Office for Victims of Crime. Extortion: Undermining Business, Includes crime statistics collected by the Governments, and Security. Westport, DOJ. CT: Praeger Security International, 2007. A book about bribery of foreign Transparency International. “Spotlight.” (http://www.transparency.org/.) The Web officials by the president of TRACE site of an organization devoted to exposing International, an organization dedicated corruption around the world. Includes to fighting corruption. country ratings and news reports about corruption.

Web Sites

Federal Bureau of Investigation. “Breaking News.” (http://www.fbi.gov/). U.S. Department of Justice. The official Web site of the FBI. Includes links to news stories about recent cases investigated by

U.S. Securities and Exchange Commission. (http://www.sec.gov/index.htm.) The Web site of the SEC. Includes links to news stories about legal violations and information about what the SEC does and how it works.

Index Accident investigations, 22 Agnew, Spiro, 31 Alaska legislators, 20, 49–57 Albuquerque, NM, 27, 33 Allen, Bill, 51–56 American Stock Exchange (Amex), 71 Aragon, Manny, 28–30, 29 Assault investigations, 22 ATF (Alcohol, Tobacco and Firearms Administration), 10 Audiotapes, 9, 37 BAE, 73–74 Bauer, Gene, 26 Bear Stearns, 64, 69 Benin, 77 Berlin, Tony, 26 BetCRIS, 81–82, 83, 85, 86–87, 89 Bin Nasser, Turki, 74 Blackmail defined, 12 law enforcement knowledge of, 21 Liechtenstein bank, 6 McDermott, 12–13, 17 See also Extortion Blase, Nicholas, 60, 62

Bookmaking, 35, 41, 44 The Boston Globe (newspaper), 35 Botnet armies, 83, 84–86, 87, 91 Bowers, Kathryn, 59 Brasco, Donnie, 46, 46–48 Bribery of Agnew, 31 of Alaskan legislators, 20, 49–57 to arrange visa, 14, 17 convictions and sentencings (2003–2004), 20, 59, 63 defined, 14 of foreign officials by American companies, 74–77 by Fortune 500 companies, 67 of Illinois Department of Transportation officials, 23–26 of Illinois judge, 62–63 of Illinois mayor, 60, 62 insider trading cases, 64–65, 67–72 international investigations underway (2007), 68

law enforcement knowledge of, 21 legality of, 15–16 of Milwaukee alderman, 6–7 of New Mexico legislator, 27, 27–30, 33 of public officials and democracy, 18, 20 of Tennessee legislators, 57, 58, 59 as unreported income source, 60 Bulger, James “Whitey,” 36–37, 41–45, 43 Burrus, Chip, 77 Cash-flow analysis, 62–63 Catellus Development, 65, 67 Collins, Patrick, 34 Commercial truck-driving licenses (CDLs) bribery case, 23–26 Computer systems analysts, becoming, 85 Connolly, Bridget, 63 Connolly, Timothy, 36–37 Conspiracy cases, 9, 33 Convention on Combating Bribery of Foreign Public Officials in

Index

International Business Transactions (1997), 75 Convictions bribery (2003–2004), 20, 59, 63 money laundering defendants with prior, 45 racketeering and extortion (2003–2004), 17 Court orders search warrants, 55 wiretaps, 37, 38, 51, 52 Creasman, W. Scott, 82–83 Credit card numbers, obtaining, 88 Crime scenes, absence of, 8 Crimes of exploitation, described, 12 Crimes of opportunity, described, 12 Criminal Investigation Division (FBI), 62 Cybercriminals gambling Web site and, 81, 81–82, 83, 85, 86–87, 89 MySpace and, 78, 79–80, 80 Operation Clean Sweep and, 82, 90–91 techniques used by, 78–79, 83–86 types of crimes committed, 88 Czurylo, Dennis, 62–63 Davies, Rich, 21, 33

DEA (Drug Enforcement Agency), 10, 42–45 Detectives, becoming, 15 DiScenza, Tim, 59 Doctors, 66 Documentary evidence Illinois Department of Transportation case, 26 paper trails, 27–30, 69, 70, 71, 72 DoS (Denial-of-Service) attacks, 83 Doukas, Bill, 62 Drug dealers, 42 Drug (pharmaceutical) trials, 66 Dyson, Fred, 54 E-Cycle Management, 57, 59 Electronic banking system, 40 Electronic trails, 69, 70, 71 Europe, bribery in, 75 Evidence absence of crime scene and, 8 in extortion cases, 37 intelligence, 19, 19 paper trails, 27–30, 69, 70, 71, 72 stock market cases, 65, 67–68 Extortion complicit victims and, 35–36 convictions (2003–2004), 17 defined, 13

drug dealers, 42 evidence in, 37 guestworkers from Mexico, 7 Mafia, 36, 41 Massachusetts bookmakers, 35, 37, 41 MySpace, 78, 79–80, 80 online gambling site, 81, 81–82, 83, 85, 86–87, 89 techniques used by cybercriminals, 78–79 Fall, Albert, 31 FBI (Federal Bureau of Investigation), 10 Alaskan legislators, 49–57 cybercrimes and, 82, 88, 89, 90–91 Mafia investigation, 46, 46–48 New Mexico kickbacks investigation, 30 Operation Safe Roads, 25, 33–34 Operation Tennessee Waltz, 57, 58, 59 training for, 15 undercover investigation dangers, 45 Flemmi, Stephen, 36, 39, 41–44 Flipping informants, 36 Ford, John, 58, 59 Foreign Corrupt Practices Act (FCPA, 1977), 75


Forensic Tec Solutions, 90–91 Fortune 500 companies, bribery by, 67 Franklin, Eric, 64, 68–69 Friestad, Scott, 65, 68–69 Gambling Web site case, 81, 81–82, 83, 85, 86–87, 89 Gangs defined, 44 extortion by, 36–37, 41–44 violent crime committed annually by, 37, 41 Gardner, Doris, 86 Great Britain, 73–74, 87, 89–90 Guestworkers extortion case, 7 Guttenberg, Mitchel, 64, 68–69 Guzman, Ricardo, 22–23, 25 Halliburton, 75, 76–77 Harrison, Shaun, 78, 79–80, 80 Heller’s Cafe, MA, 35, 37–38, 41 Houlihan, James, 63 Human intelligence, described, 19 Identity theft, 88 Illinois Department of Transportation, 23–26 judge, 62–63 mayor of Niles, 60, 62 100

Imagery intelligence, described, 19, 19 Income tax evasion, 60, 60–63 Informants, flipping, 36, 37 Insider trading, 64–65, 67–72 Inspector General of Illinois, 26 Intelligence, 19 Internal controls, 76 Internet anonymity of, 80–81 electronic banking system, 40 electronic trails, 69, 70, 71 security breaches, 83 See also Cybercriminals Investigations court orders and wiretaps, 37, 38, 51, 52 of cybercrimes, 88 difficulties, 8–9 joint, 9–10 number underway involving international bribery (2007), 68 search warrants, 55 surveillance techniques, 37–38, 43 undercover, 45–48 See also specific cases Investigators, becoming, 15 IRS (Internal Revenue Service), 10, 60, 62–63 Isis Pharmaceutical, 66

Joint investigations, described, 9–10 Kickbacks, 30, 31 Kleptocracies, 16 Kohring, Vic, 53, 54 Kott, Pam, 50 Kott, Pete, 49, 50, 53–54, 55 Latin Kings, 44 Lebumfacil, Glenn, 82 LeFevour, Richard, 62–63 Liechtenstein bank blackmail case, 6 Loan sharks, 42 Lockheed Martin, 77 Los Angeles District Attorney’s Bureau of Investigation, 80 “The Losers,” 44 Lyon, Barrett, 86–90 Mafia defined, 44 FBI undercover investigation of, 46, 46–48 payments to, 36, 41 Martinez, Domingo, 28 Martinez, Sandra, 30 Martinez, Toby, 30 Maryland governor, 31, 31 Maxwell, Christopher, 91 Mayer, Robert, 16 McDermott, Craig, 12–13, 33 McGee, Michael, 6–7

Index

McNeil, L.C., 59 Metcalfe, Ray, 50–51 Metropolitan Courthouse (Albuquerque, NM), 27, 33 Milwaukee, WI, 6–7 Misdirection of funds, 72–73 Mondelli, Saverio, 78, 79–80, 80 Money laundering defendants with prior convictions, 45 described, 39–41 Massachusetts bookmaking, 37 New Mexico kickback case, 30 percentage of defendants pleading guilty, 42 using slush funds, 72 Moral issues, 16–18 Murder investigations, 22 MySpace, 78, 79–80, 80 Nakamura, Judith, 28 National Association of Securities Dealers (NASDAQ), 71 National Hi-Tech Crime Unit (NHTCU, Scotland Yard), 87, 89–90 New Mexico legislators, 27, 27–30, 33 New York City Council, 72–73

New York Stock Exchange (NYSE), 65, 71 Nigeria, 76–77 Null-routing, 82 Oil industry Alaskan legislators, 20, 49–57 Halliburton, 75, 76–77 Teapot Dome, 31 O’Keefe, Brett, 90–91 Online gambling site, 81, 81–82, 83, 85, 86–87, 89 Open-source intelligence, described, 19 Operation Cyber Sweep, 82, 90–91 Operation Safe Roads investigation, 25, 33–34 Operation Tennessee Waltz, 57, 58, 59 Organized crime, defined, 44 Palin, Sarah, 57 Paper trails, 27–30, 69, 70, 71, 72 Parra, Raul, 28–30 Patel, Jiguveshkumar, 14, 17 Peel, Harvey, 28, 29 Petroleum production tax (PPT), 49 Petty cash funds, 72 Pharmaceutical trials, 66 Phishing, 88 Phone taps, 10

Pistone, Joe, 46, 46–48 Power, Joe, 23, 26 Probable cause, 62 P2RS Group, 29 Public officials bribery cases Agnew, 31 Alaska legislators, 20, 49–57 democracy and, 17, 18, 20 Illinois Department of Transportation, 23–26 Illinois judge, 62–63 Illinois mayor, 60, 62 international, 74–77 Milwaukee alderman, 6–7 New Mexico legislator, 27, 27–30, 33 Teapot Dome scandal, 31 Tennessee legislators, 57, 58, 59 Racketeering, 17, 25 Raynor, Tammy, 24, 26 Retainers, 29 Richardson, Mickey, 81, 81–82, 83, 85, 86–87 Ring, James, 45 Ruebenson, Ray, 25 Ruehle, Darryl, 29 Ruggiero, Lefty, 47–48 Ryan, George, 24–26, 25 Saccardo, Joseph, 35, 36–38 Satellites, 19 Saudi Arabia, 73–74 Schiff, Marc, 30, 33 101


Schultz, Ken, 30 Scotland Yard, 87, 89–90 Search warrants, 55 Seattle Times (newspaper), 66 Securities and Exchange Commission (SEC), 65, 67–72 Signals intelligence, described, 19 Slush funds, 72–74, 76 Smart Solutions, 30 Smith, Rick, 49, 51, 54–56, 56 Stock exchanges, 64–65, 65, 67–72 Subpoenas, 69 Surveillance techniques, 37–38, 43 See also Wiretaps Tax evasion, 60, 60–63 Teapot Dome, 31 Technip, 76 Technologies West, 28 Tennessee legislators, 57, 58, 59 Thomsen, Linda Chatman, 72

102

Threats in blackmail, 12 in extortion, 13, 79 Thullen, William, 62–63 Titan, 77 Travellers World, 73–74 Tri-Star Investments, 76 Trucker licenses bribery case, 23–26 TSKJ, 76–77 Turner, Dayton, 89–90 Uncle Bill, 51–56 Undercover investigations dangers, 45 FBI, 46, 46–48, 57, 59 IRS, 60, 62 Union Bank of Switzerland (UBS), 64, 68–69 U.S. Marshals, 10 U.S. Secret Service, 80 Veco case, 49–57 Victims cases initiated by, 32–33 complicit, 35–36

of cybercrimes, 88 fear faced by, 9 incentives not to go to law enforcement, 21 Videotapes Alaskan legislators bribery case, 51–53, 54 work involved with, 9 Vigan, Peter Josef, 12–13, 17, 32, 32–33 Vigil, Juan, 28 Visa bribery case, 14, 17 Wardle, Robert, 74 The Washington Post (newspaper), 90 Weak links, 33–34, 36 Willis, Janet, 22–23, 25 Willis, Scott, 22–23, 23, 25 Wiretaps, 10, 38, 51–52 Alaskan legislators, 57 court orders and, 37, 38 installing, 38 work involved with, 9 Zombies, 84–86, 87

Picture Credits Cover: © ThinkStock/Superstock © 2008/Jupiterimages 73 AP Images 19, 23, 27, 30, 32, 39, 50, 53, 56, 58, 60, 65, 80, 86 AP/Wide World Photos 31 © A. Huber/U.Starke/zefa/Corbis 38 Getty Images 43 Hulton Archive/Getty Images 46 Image copyright Robert Pernell, 2008. Used under license from Shutterstock.com 66 Image copyright UltraOrto, S.A., 2008. Used under license from Shutterstock.com 61 © iStockphoto.com/alexsl 84 © iStoockphoto.com/ericsphotography 40 © iStockphoto.com/gblu 70 © iStockphoto.com/LeggNet 89 © iStockphoto.com/PINOPIC 79 © iStockphoto/ericsphotography 18 © iStockphoto/Juanmonino 14 © iStockphoto/susan daniels 13 James Lauritz/Digital Vision/Getty Images 16 Karen Bleier/AFP/Getty Images 81 Michael Blann/Digital Vision/Getty Images 9 © Reuters/Corbis 75 Toledano/Stone/Getty Images 8 Tim Boyle/Getty Images 25 103


About the Author Bonnie Juettner is a writer and editor of children’s reference books and educational videos. She is also a mother of two.

10

Crime Scene

Investigations

Crime solving is painstaking, but modern methods and technological advances have significantly changed the field of criminal investigation. Clues to crimes both spectacular and ordinary can now be found in the tiniest bits of evidence thanks to cutting-edge forensic techniques. Crime Scene Investigations examines the fascinating world of the criminal investigator and other professionals who are on the front line of solving today’s (and some of yesterday’s) most notorious crimes. All books feature crime statistics, career information, explanations of crime-solving techniques, and crimebusting facts. In addition, bibliographies for further research, full-color photographs, charts, and a detailed index are also included.

Blackmail and Bribery (Crime Scene Investigations)

Ballistics (Crime Scene Investigations)

Forensic Biology (Crime Scene Investigations)

Crime Scene Investigation (Criminal Investigations)

Body Farms (Crime Scene Investigations)

Forensic Art (Crime Scene Investigations)

The 911 Investigation (Crime Scene Investigations)

K-9 Police Units (Crime Scene Investigations)

The Columbine School Shootings (Crime Scene Investigations)

Crime Scene

Crime Scene

Crime Scene

Crime Scene

Crime Scene

The John F. Kennedy Assassination (Crime Scene Investigations)

Scene of the Crime

Real Crime Scene Investigations: Forensic Experts Reveal Their Secrets

Crime Scene Investigators

Advanced Crime Scene Photography

Advanced Crime Scene Photography

Advanced Crime Scene Photography

Electronic Crime Scene Investigation

Scene of the Crime

Crime Scene Investigation

Organized Crime (Criminal Investigations)

Crime Scene at Cardwell Ranch

The Scene Of The Crime

Crime Scene At Cardwell Ranch

Crime Scene at Cardwell Ranch

The Scene of the Crime

Blackmail

Blackmail and Bribery (Crime Scene Investigations)

Ballistics (Crime Scene Investigations)

Forensic Biology (Crime Scene Investigations)

Crime Scene Investigation (Criminal Investigations)

Body Farms (Crime Scene Investigations)

Forensic Art (Crime Scene Investigations)

The 911 Investigation (Crime Scene Investigations)

K-9 Police Units (Crime Scene Investigations)

The Columbine School Shootings (Crime Scene Investigations)

Crime Scene

Crime Scene

Crime Scene

Crime Scene

Crime Scene

The John F. Kennedy Assassination (Crime Scene Investigations)

Scene of the Crime

Real Crime Scene Investigations: Forensic Experts Reveal Their Secrets

Crime Scene Investigators

Advanced Crime Scene Photography

Advanced Crime Scene Photography

Advanced Crime Scene Photography

Electronic Crime Scene Investigation

Scene of the Crime

Crime Scene Investigation

Organized Crime (Criminal Investigations)

Crime Scene at Cardwell Ranch

The Scene Of The Crime

Crime Scene At Cardwell Ranch

Crime Scene at Cardwell Ranch

The Scene of the Crime

Blackmail

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