THURSDAY, NOVEMBER 20, 2003|
TDD (202) 514-1888
BACKGROUND ON OPERATION CYBER SWEEP - EXAMPLES OF PROSECUTIONS
The following are examples of cases brought under Cyber Sweep:
California - Central District
United States v. Mayzels, Nos. CR 03-769-WJR and CR 03-1018-WJR (C.D. Cal. and D. Conn., pleaded guilty Nov. 10, 2003)
• Summary: On November 10, 2003, Albert Mayzels pleaded guilty to charges set forth in two indictments for unauthorized use of access devices and conspiracy to possess counterfeit checks as part of an Internet fraud scheme against online retailer Outpost.Com. From October 2002 to February 2003, Mayzels, a resident of Studio City, California, obtained stolen credit card numbers from various individuals and used the cards to purchase more than $80,000 in computer equipment and electronic devices from Outpost.Com, based in Kent, Connecticut. In addition, from February through July 2003, Mayzels and a co-conspirator manufactured counterfeit checks payable to family members and Avante-Gard Wireless Broadband, Inc., a high-technology start-up company Mayzels runs. In total, Mayzels attempted to cash more than $112,000 in counterfeit checks, including approximately $60,000 in checks paid by Citibank. The cases were part of a joint investigation and prosecution by the FBI Los Angeles Field Division, FBI New Haven Field Division, and the United States Attorney’s Offices in Los Angeles and New Haven, Connecticut.
United States v. Nguyen (C.D. Cal., convicted Oct. 28, 2003)
•Summary: On October 28, 2003, a federal jury found Tony Minh Nguyen guilty on both counts of a two-count indictment charging him with criminal trademark violations. Nguyen directed sales and production at Dynasty Memory, Inc., a multi-million dollar Santa Ana computer supply company.
The jury found that Nguyen directed Dynasty employees to purchase out-of-date Compaq memory components. Then, Dynasty employees would remove the Compaq labels and, under Nguyen’s direction, they would re-adhere the Compaq labels to non-Compaq memory components, creating a product that would be substantially indistinguishable from genuine Compaq products. Nguyen then directed that these counterfeit parts be sold as the genuine article. The indictment alleges that the scheme ran from August 2000 until December 2000.
At trial, the evidence showed that defendant had counterfeited at least $5 million to $7 million of Compaq computer memory modules. The evidence included evidence of the manufacturing of tens of thousands of Compaq computer memory modules.
The investigation into Dynasty's sale of counterfeit Compaq parts began when consumers started returning to Compaq memory products that Compaq determined were counterfeit and had originated from Dynasty. Compaq brought the matter to the FBI, which investigated the case that resulted in Nguyen’s arrest.
Nguyen was remanded into custody after the verdict. Sentencing is scheduled for Jan. 26, 2004. Nguyen faces a statutory maximum penalty of 20 years in federal prison and fines of up to $4 million. This case is the result of an investigation by the Federal Bureau of Investigation.
•Press Release: http://www.cybercrime.gov/nguyenConviction.htm
United States v. Racine, No. CR 03-557-AHM (C.D. Cal., sentenced Nov. 12, 2003)
•Summary: On Nov. 12, 2003, John William Racine II, a website designer from Norco, California, was sentenced in the U.S. District Court for the Central District of California for two felony charges after admitting to federal authorities that he was responsible for the hijacking of Arabic-language news station Al Jazeera's website during the war in Iraq. Racine, who had pleaded guilty to charges of wire fraud and illegal wiretapping, was sentenced to three years probation, a $2,000 fine, and ordered to perform 1,000 hours of community service. In addition to the sentence, the court imposed severe restrictions on Racine's computer use during the term of his probation.
Al Jazeera Space Channel, based in Doha, Qatar, is an Arabic-language media organization that had registered the domain name Aljazeera.net through Network Solutions, Inc., in Dulles, Virginia. In addition to its satellite television news service, Al Jazeera provided English and Arabic-language news through its Aljazeera.net website. Racine diverted the website and e-mail traffic for AlJazeera.net after learning in March 2003 that the website contained images of captured American prisoners of war and soldiers killed in action during Operation Iraqi Freedom. Racine gained control of the Aljazeera.net domain name by defrauding Network Solutions where Al Jazeera maintained an account for its domain name and e-mail services. Racine then diverted the website traffic to another website he had designed featuring an American flag in the shape of the continental United States and the words "Let Freedom Ring...." Racine also intercepted approximately 300 e-mail messages destined for the Aljazeera.net domain and diverted the messages to an e-mail account under his control.
Racine admitted to FBI agents that he had contacted Network Solutions by telephone and e-mail in an attempt to gain control of the Aljazeera.net domain name. He ultimately created a false photo identification card to impersonate an Al Jazeera systems administrator and forged the systems administrator's signature on a Network Solutions "Statement of Authorization" form. Racine then sent the fraudulent documents to Network Solutions by facsimile and induced Network solutions to give him control of the Al Jazeera account. Racine subsequently changed the Aljazeera.net account settings and redirected all web traffic through a dynamic domain name service and ultimately to his website containing the American flag. In addition, he re-routed all e-mail traffic to an account he had created on MSN Hotmail using the name of the Al Jazeera systems administrator. While Racine maintained control of Al Jazeera's domain name, Internet users were unable to access the Al Jazeera news websites and Al Jazeera was unable to receive e-mail sent to the domain.
United States v. Ramirez (C.D. Cal., criminal complaint filed Nov. 19, 2003)
•Summary: On Nov. 19, 2003, a criminal complaint was filed against Raul “James” Ramirez, charging him with intentionally accessing a computer without authorization and obtaining information from a consumer credit agency, a felony in violation of 18 U.S.C. § 1030(a)(2)(A). Ramirez was a fugitive from Arizona authorities after escaping from jail in Kingman, Arizona. Ramirez had been convicted of shooting a victim in the knees while under the influence of drugs and stealing the victim’s car. He was in custody on an unrelated domestic violence charge when he escaped from jail and continued his criminal activities by allegedly gaining unauthorized access to the computers of “NowCom,” in Los Angeles. NowCom provides car dealerships with online access to credit histories to assist in automobile financing. Ramirez, a former employee of the Automart in Kingman, Arizona, used his knowledge of the NowCom system to allegedly download without authorization the credit histories of numerous individuals for use in identity fraud. On Nov. 12, 2003, the FBI executed a search warrant at his residence in Bellflower, California and arrested Ramirez.
United States v. Wiggs, No. CR 03-926 (C.D. Cal., plea agreement filed Nov. 19, 2003)
•Summary: On Nov. 19, 2003, the United States Attorney’s Office in Los Angeles filed a written agreement in which former computer technician Walter L. Wiggs agreed to plead guilty to federal computer crimes. Wiggs was arrested by the FBI on Aug. 22, 2003, at his residence in Douglasville, Georgia, on charges of gaining unauthorized access to government computer systems. Wiggs gained access to 13 computer systems that used the interactive voice response software developed by his former employer Technology for Business Corporation (“TFBC”) in Manhattan Beach, California. In particular, Wiggs’s criminal conduct included disrupting the Los Angeles County Department of Child and Family Service's Child Protection Hotline by accessing the system from his home in Douglasville, Georgia and bringing down the system by deleting critical configuration files. From July 1 through July 4, 2003 child abuse victims, police officers, hospitals, and mental health workers who called the hotline were unable to speak to an agency official, or their calls were significantly delayed. In addition to the Child Protection Hotline, Wiggs gained unauthorized access to at least 12 other computer systems that used TFBC's interactive voice response software, including systems used by the City of San Diego, City of Modesto, and the Orange County District Attorney's Office.
California - Northern District
United States v. Booher (N.D. Cal., criminal complaint filed Nov. 19, 2003)
•Summary: On Nov. 19, 2003, Charles Booher was charged in a criminal complaint in the Northern District of California with sending threatening interstate and foreign communications (18 U.S.C. 875(c)). According to the affidavit filed in support of the criminal complaint, from May to July 2003, Booher sent numerous e-mail and telephonic death threats to individuals residing in Canada. Booher allegedly thought that these individuals were responsible for sending him unsolicited (or spam) e-mail. The threatening messages that Booher allegedly sent were very explicit and graphic, threatening to kill or maim employees at the company. The Sunnyvale Department of Public Safety also made contact with Booher in hopes of getting him to stop, but he allegedly continued making regular death threats to the victims.
United States v. Chan, No. CR 02-20043 RMW (N.D. Cal., pleaded guilty Nov. 10, 2003)
•Summary: Defendant Malinda Chan pleaded guilty to trafficking in counterfeit software products in violation of 18 U.S.C. § 2320(a). Chan’s counterfeiting activities also spanned two years and included multiple versions of Microsoft Corporation's software. Chan stipulated to the forfeiture of approximately $30,000 as part of her plea.
United States v. Fei Yi, et al., No. CR 02-20145 JW
•Summary: On Nov. 4, 2003, U.S. District Court Judge James Ware affirmed the constitutionality of the Economic Espionage Act (18 U.S.C. s 1831(a)(3)) and denied defense motions to dismiss and for a bill of particulars.
•Press Release: http://www.usdoj.gov/usao/can/press/html/2002_12_4_yezhong.html)
United States v. Li Jun Lei, No. CR 02-20048 RMW (N.D. Cal., pleaded guilty Nov. 10, 2003)
•Summary: On Nov. 10, 2003, Li Jun Lei pleaded guilty to trafficking in counterfeit software products, in violation of 18 U.S.C. § 2320(a). The defendant's counterfeiting activities spanned two years and included multiple versions of Microsoft Corporation's software. She also stipulated to the forfeiture of more than $30,000 as part of her plea.
United States v. Ramssiss (N.D. Cal., sentenced Oct. 23, 2003)
•Summary: On Oct. 23, 2003, Nabil Ramssiss was sentenced to 46 months imprisonment following a guilty plea for intentional damage to a protected computer (18 U.S.C. § 1030(a)(5)) and failure to appear. Ramssiss intentionally caused damage to the computer system of DIVA Systems Corporation in Menlo Park, which developed and marketed a digital interactive video service. According to the plea agreement and information provided to the Court, Ramssiss gained unauthorized access to DIVA's computer system the day after he was terminated and intentionally disabled 14 Cisco routers that controlled DIVA's wide area network across the United States. Ramssiss' intentional conduct caused the DIVA network to fail, which required extensive repairs by numerous DIVA employees before service was completely restored.
•Press Release: http://www.usdoj.gov/usao/can/press/html/2003_10_03_ramssiss.html
California - Southern District
United States v. O’Keefe (S.D. Cal., arrested and indictment unsealed Sept. 29, 2003)
•Summary: On Sept. 29, 2003, Brett E. O’Keefe was arrested, and an indictment against O’Keefe subsequently unsealed, for his role in an alleged conspiracy to access military, government, and private-sector computers. O’Keefe is the President of Forensic Tec Solutions, a computer security company located in San Diego, California. The six-count indictment charged O’Keefe with conspiracy to gain unauthorized access to government, agency or protected computers and obtaining information for financial gain.
According to the indictment, the object of the conspiracy was for O'Keefe and his co-conspirators to gain unauthorized access to government and military computers, copy computer files and take these files to the media in order to generate public visibility for his company. This would, in turn, lead to new clients and increased profits. It is further alleged that an additional object of the conspiracy was for O'Keefe and his co-conspirators to gain unauthorized access to private sector computers to copy information. The defendant would then use this information to contact the victim companies in an attempt to solicit their business.
According to the indictment, O'Keefe and his co-conspirators possessed without authorization files belonging to the following Government agencies: National Aeronautics and Space Administration (NASA), United States Army, United States Navy, Department of Energy and National Institutes of Health.
•Press Release: http://www.usdoj.gov/usao/cas/cas30929.2.htm
United States v. Wallman, No. 02-CR-2496-JM (S.D. Cal., sentenced Oct. 6, 2003)
•Summary: On Oct. 6, 2003, Guy Wallman was sentenced to a term of 41 months imprisonment and required to make restitution to identified victims and cooperate with the IRS in the payment of back taxes. Wallman's wife and co-defendant, Denise Wallman, was sentenced to spend six months in a halfway house for her role in the offense, and to pay restitution to identified victims and cooperate with the IRS in the payment of back taxes.
In connection with their guilty pleas in March 2003, Guy Wallman and his wife, Denise Wallman, acknowledged that from 1999-2002, they sold counterfeit sports and celebrity memorabilia over the Internet, operating under the names of "autohound63," "autoalley1," "Royce Enterprise," and "eldoradoclub." Their sales included items supposedly signed by various sports figures, such as Muhammed Ali and Tiger Woods, as well as celebrities such as Arnold Schwarzenegger. During the period from 1999-2002, the defendants sold over $449,000 in counterfeit sports and celebrity memorabilia over the Internet. In pleading guilty to mail fraud, Guy Wallman admitted that he falsely represented that the signatures on the memorabilia were genuine and offered customers Certificates of Authenticity falsely attesting that the signatures were authentic.
Both Guy Wallman and Denise Wallman also pled guilty to tax evasion. They admitted that they failed to file federal income tax returns for the calendar years 2000-2001 and intentionally failed to declare the income from the sale of the memorabilia, knowing that they owed a substantial amount of income tax to the United States from the sale of the memorabilia.
•Press Release: http://www.usdoj.gov/usao/cas/cas31020.1.htm
United States v. Mayzels (C.D. Cal. and D. Conn.) [see above, Central District of California]
Georgia - Northern District
United States v. Satary (N.D. Ga., indictment filed Oct. 22, 2003)
•Summary: On Oct. 22, 2003, a federal grand jury in the Northern District of Georgia returned an indictment against Khalid Ahmed Satary and five other individuals with conspiracy and pirating of copyrighted material, with a gross retail market value to the recording industry in excess of $50,000,000. The indictment specifically charges that Satary and two of the defendants manufactured and distributed counterfeit and pirate compact discs (CDs), counterfeit audio cassette tapes, counterfeit labels, and trademarks in various locations throughout the Atlanta metropolitan area, and in Macon, Georgia, and that the other three defendants manufactured and distributed counterfeit CDs, labels, and trademarks in various locations throughout the Atlanta metropolitan area.
The indictment also charges from in or before April 1999, through in or about February 2003, Satary and the co-defendants manufactured counterfeit CDs and counterfeit audio cassette tapes through the unauthorized recording of popular music protected by copyright and the unauthorized duplication of artwork, graphics, and photographs which was protected by copyright contained on labels of popular music, often manufacturing "compilation" recordings and individual recordings by numerous contemporary and classic artists.
•Press Release: http://www.usdoj.gov/usao/gan/press/11-13-03.htm
Louisiana - Middle District
United States v. Haney (M.D. La., indictment filed Oct. 1, 2003)
•Summary: On Oct. 1, 2003, a federal grand jury in the Middle District of Louisiana indicted Ryan Matthew Haney, 20, a resident of Moscow, Idaho and student at the University of Idaho, on three counts of wire fraud (18 U.S.C. §1343). Haney was arrested in Moscow, Idaho on Oct. 28, 2003.
The indictment alleges that the defendant, utilizing the email address Hydrocodone@anywhereUSA.com posted several messages on a bulletin board owned by www.healthboards.com advertising the sale of prescription pain pills. In February 2003, an FBI agent, acting in an undercover capacity, began sending e-mails to the defendant and arranged to purchase Morphine, Oxycodone, Hydrocodone, Skelaxin and Percocet. The agent wired the funds to purchase the drugs to the defendant from a local convenience store in Baton Rouge and requested that the drugs be sent to him in Baton Rouge. The defendant and another individual went to the Western Union Office in Moscow Idaho and picked up the funds but the defendant never sent the drugs ordered by the undercover agent.
Search Warrants (E.D. Va., executed Nov. 19, 2003) [see Eastern District of Virginia, below]
Michigan - Eastern District
United States v. Davy, No. 03-80963 (E.D. Mich., criminal complaint issued Oct. 27, 2003)
•Summary: On Oct. 28, 2003, Vincent M. Davy was arrested on a criminal complaint for credit card fraud, in violation of 18 U.S.C. § 1029, where the Internet was allegedly used to order more than $9,000 in airline tickets. Davy was a former hotel desk clerk who had access to hotel guests’ credit-card numbers and other personal data. The tickets were allegedly purchased using stolen credit-card information from 12 victims using Expedia.com and Lodging.com. This case was investigated by the U.S. Secret Service.
Missouri - Eastern District
United States v. Formato (E.D. Mo., indictment filed Nov. 13, 2003)
•Summary: On November 13, 2003, a federal grand jury in the Eastern District of Missouri indicted Nicholas Formato, 21, Shaun Kellerman, 22, and Aaron Coffey, 20, on one felony count of conspiracy to commit wire fraud.
According to the indictment, between Oct. 2, 2002 and Feb. 13, 2003, Formato, Kellerman, and Coffey monitored Internet-based auctions for sporting event and concert tickets on systems such as eBay and identified losing bidders. Thereafter, one or more of the defendants would send a form letter e-mail message to losing bidders informing them of the availability of additional tickets and inviting those bidders to purchase such tickets from one of them. When a bidder responded to an e-mail invitation to purchase tickets, the bidder was instructed how to pay for the tickets, typically by way of a Western Union money transfer. In other cases, one or more of the defendants fraudulently solicited bids for event tickets using auctions on eBay. Winning bidders were typically notified by e-mail that the winning bidder was required to make a substantial payment of funds, typically by way of a Western Union transfer of money, before any tickets would be delivered. The indictment further alleges that, upon receipt of money from a bidder, the defendants would keep the proceeds but did not deliver tickets to the bidder. The events included tickets for a Bruce Springsteen concert, tickets for the Fiesta Bowl, tickets for the 2002 SEC Championship football game, and tickets for a Los Angeles Lakers basketball game.
United States v. Stewart (E.D. Mo., indictment filed Nov. 13, 2003)
•Summary: On Nov. 13, 2003, a federal grand jury indicted Douglas C. Stewart, 30, on two felony counts of wire fraud, one felony count of mail fraud and one felony count of copyright infringement. If convicted, Stewart faces a maximum penalty of 20 years in prison and/or a fine of $250,000, per count, on the wire and mail fraud charges and five years and/or a fine of $250,000 on the copyright infringement charge.
According to the indictment, between February 2003 and May 2003, Stewart sold counterfeit copies of computer software programs on eBay. As part of the scheme, Stewart obtained unauthorized copies of computer software programs using Internet-based systems such as KaZaA. Stewart offered these unauthorized copies on eBay. The copies included Adobe PageMaker, Adobe Illustrator and Adobe Photoshop. In some cases, Stewart advertised the software program he offered for sale as being the full retail version of the program and failed to disclose that the software program was an unauthorized and counterfeit copy and not a full retail version. Stewart received bids from eBay users and in some cases instructed the winning bidder to pay by personal check, money order, or cashier's check and to mail the payment to him in the St. Louis area. The indictment also alleges that Stewart often required payment from the winning bidder before he would ship or mail the software program. Finally, the indictment states that between February and April 30, 2003, Stewart infringed the copyright of Pagemaker from Adobe Systems, Inc., by reproducing and distributing ten or more copies of the copyrighted work which have a total retail value of $2,500 or more within a 180-day period.
Missouri - Western District
United States v. Ross, No. 03-00325-01-CR-W-FJG (W.D. Mo., indictment filed Oct. 7, 2003)
•Summary: On Oct. 7, 2003, a federal grand jury in the Eastern District of Missouri indicted Andrea Ross, 23, on charges related to computer fraud and identity theft. Count One of the federal indictment alleges that Ross, with intent to defraud and without authorization, accessed a protected computer of American Express Company in order to further an intended fraud and to obtain an American Express Card on Oct. 15, 1999. Count Two alleges that Ross used a Social Security number that had not been assigned to her, in order to obtain an American Express Card on Oct. 15, 1999. Count Three alleges that Ross, with intent to defraud and without authorization, accessed a protected computer of American Express Company in order to further an intended fraud and to obtain an American Express Card on Aug. 16, 2000. Count Four alleges that Ross used a Social Security number belonging to another person with the intent to commit an unlawful activity, that being unauthorized use of an American Express Card, on Aug. 16, 2000. Count Five alleges that Ross used an American Express Card issued in another person’s name between Aug. 16, 2000 and Feb. 7, 2001, in order to receive something of value equal to or exceeding $1,000.
United States v. Zielin et al. (D.N.H., informations filed Nov. 19, 2003)
•Summary: On Nov. 19, 2003, the U.S. Attorney’s Office for the District of New Hampshire filed five informations charging Jordan Zielin of New York, David Foresman of Lombard, Illinois, Kenneth Woods of Warrentown, Virginia, Daniel McVay of North Easton, Massachusetts, and John Neas of Holbrook, Massachusetts for their participation in conspiracies to violate copyright laws (18 U.S.C. §§371 and 2319(b)(1)). During the course of an undercover operation, agents and cooperating witnesses infiltrated several Internet-based computer servers, known as “warez servers” run by groups of software pirates, and secret Internet Relay Chat channels used by those involved to communicate in real time about their software piracy activities.
United States v. Kalin (D.N.J., criminal complaint filed Nov. 19, 2003)
•Summary: On Nov. 19, 2003, a criminal complaint was filed against Shawn G. Kalin, charging him with violating 18 U.S.C. § 1030(a)(2)(c). Kalin allegedly registered four Internet websites identified by domain names deceptively similar to that of a website operated by DealerTrack, Inc., a company that provides services via the Internet to automobile dealerships located throughout the United States. These services include the ability for a dealership to order credit reports on prospective automobile buyers and to assist these customers in identifying and applying for financing to purchase automobiles. By causing the initial or main page of each of the four deceptively similar websites to be almost identical to the main page of the www.dealertrack.com Internet website, Kalin allegedly was able to have a number of dealership employees mistakenly enter usernames and passwords at his deceptively similar Websites rather than at the main page of the www.dealertrack.com Internet Website. On at least one occasion, utilizing the user name and password for an Internet account, Kalin allegedly obtained unauthorized access via the Internet into that account on the www.dealertrack.com Website from a computer located at Kalin’s place of business, a used-car business in Las Vegas, Nevada. During this intrusion, Kalin obtained personal information for one member-dealership customer including her Social Security number.
United States v. McCarty (D.N.J., pleaded guilty Nov. 18, 2003)
•Summary: On Nov. 18, 2003, Ryan McCarty pleaded guilty to a two-count information charging him with mail fraud (18 U.S.C. § 1341) and mail theft (18 U.S.C. § 1708), in connection with McCarty’s conduct of a scheme to defraud eBay purchasers of music concert tickets and sporting event tickets and to obtain money and property from these individuals. In 2001 and 2002, McCarty posted approximately 74 eBay auction listings in which he offered music concert tickets and sporting event tickets. Although McCarty took advance payments from approximately 54 winning bidders, he never provided any of the tickets he had offered. In 2002 and 2003, McCarty also periodically stole letters containing personal checks from private, residential mailboxes in New Jersey, fraudulently endorsed the stolen checks, deposited them into personal bank accounts, and withdrew the money from these accounts to pay personal expenses. As a result of these latter actions, McCarty caused a loss to his victims of approximately $53,319.
New York - Eastern District
United States v. Shu-Wa Tong, Yew Weng Leong, Yee Fun Leong, Tang Fung Au, and Yuen Ki Law (E.D.N.Y., arrested Nov. 5, 2003)
•Summary: These five defendants were arrested pursuant to a criminal complaint that charged them with credit card fraud that they allegedly perpetrated over the Internet auction website eBay. Specifically, the defendants allegedly purchased approximately $200,000 worth of items over the Internet from Amazon.com and Barnes&Noble.com using stolen credit cards, and then sold those items on the auction website eBay.com. The winning eBay bidders paid the defendants approximately $200,000 in total for the stolen merchandise.
New York - Southern District
United States v. Borgahard (S.D.N.Y., arrested Oct. 17, 2003)
•Summary: Peter Borgahard, a disgruntled former employee of an ISP located in New York, allegedly hacked into his former employer's computer system. Borgahard, who was arrested on Oct. 17, 2003, is alleged to have disabled the victim ISP’s routers, shutting down internet service to their customers for several days. The victim estimates damage in excess of $100,000.
United States v. Gebrezehir (S.D.N.Y., indictment filed Nov. 13, 2003)
•Summary: On Nov. 13, 2003, a federal grand jury in the Southern District of New York returned a indictment charging Issac Gebreziher with bank fraud in connection with an ongoing investigation into a complex identity and bank fraud scheme utilizing fraudulent IRS forms transmitted over the internet. The United States Attorney’s Office, along with agents for the Treasury Inspector General for Tax Administration and the United States Secret Service, have been investigating this scheme, which focuses on individuals who send phony letters on bank letterhead along with altered or counterfeit IRS forms to victims, who are generally foreign nationals living abroad with bank accounts in the United States. Some of these altered or counterfeit IRS forms appear similar to actual IRS forms which are in fact sent to non-resident aliens who maintain accounts at United States banks. These fraudulent IRS forms all require personal information concerning the victim and the victim’s bank account. The fraudulent bank letter instructs the victim to fill out the fraudulent IRS form and then to fax the completed form ostensibly to the IRS or to the bank. In reality, the fax numbers provided to the victims are Internet-based fax numbers that convert all incoming faxes to e-mail attachments and then forward the attachments to free e-mail accounts. For the victims who comply with the request, wire transfer instructions are then sent to the banks and, in many instances, large amounts of money from the victims’ accounts are transferred from their accounts, usually to overseas accounts. To date, the overall investigation has identified in excess of $700,000 that has been fraudulently obtained in this manner.
United States v. Lebor (S.D.N.Y., pleaded guilty Nov. 6, 2003)
•Summary: On Nov. 6, 2003, Avram Lebor pled guilty to wire fraud and related conspiracy charges in connection with a $9 million advance fee scheme. Lebor was the president and principal owner of MKD Capital, which held itself out as a "direct lender" or "mortgage banker" capable of providing multimillion dollar loans to finance real estate and other development projects, in return for purportedly "fully refundable" application deposits. In reality, MKD had no money to fund or collateralize loans. Over a period of more than two years, MKD promised to obtain approximately $2.5 billion in loans to fund almost 50 real estate projects, none which were ever funded, and failed to return approximately $9 million in advance fees. MKD maintained an Internet site on which it made false representations about its loan program and it conducted much of the scheme through email. In sum, the Internet facilitated MKD’s ability to hold itself out as a "corporation" capable of providing and servicing $2.5 billion in loans, when in fact it was nothing but a small mortgage brokerage.
United States v. Yip and Leong (S.D.N.Y., guilty pleas Oct. 10 and 23, 2003)
•Summary: In this Internet fraud case, the defendants and their co-conspirators stole banking and pedigree information from one of their employer's payroll office. They then used the information to open PayPal accounts, and fund the PayPal accounts by direct transfers from the victims bank accounts to PayPal. Thereafter, they used the fraudulently-funded PayPal accounts to purchase various items on eBay, and then they sold many of those items on eBay for cash. Edwin Leong pled guilty on Oct. 10, 2003 to conspiracy to commit bank fraud, identity fraud, wire fraud, and access device fraud, and a substantive count of identity fraud. Willie Yip pled guilty on Oct. 23, 2003 to conspiracy to commit bank fraud, identity fraud, wire fraud, and access device fraud, and a substantive count of access device fraud. Their scheme caused more than $80,000 in losses, and victimized more than 30 victims.
New York - Western District
United States v. Eddy (W.D.N.Y)
•Summary: On April 29, 2003, Rollond M. Eddy, 41, of New York, was indicted on nine counts of wire fraud (18 U.S.C. § 1343) and one count of mail fraud (18 U.S.C. § 1341). The indictment charges Eddy with knowingly devising a scheme to obtain money by means of false and fraudulent pretenses pertaining to the sale of limousines and, for the purpose of executing that scheme, causing certain wire communications, i.e. the Internet, to take place in interstate commerce. Eddy allegedly would make representations to customers regarding the availability of specific limousines and would send them faxes confirming the purchase of said limousines. Customers would send money either as the purchase price or as a deposit toward the purchase of the limousine. Eddy allegedly would not deliver the limousines and would not return the money obtained from the customers. Additionally the indictment alleges that Eddy would offer items, mainly scooters, for sale to customers on eBay. Eddy allegedly would have customers who purportedly won their bids send him money for the scooters, but would then fail to deliver the scooters and would fail to refund the money sent in by the customers. A hearing on the case is scheduled for Nov. 21, 2003.
United States v. Fedora (W.D.N.Y.)
•Summary: On July 9, 2003, a criminal complaint was filed by the United States Attorney's Office for the Western District of New York, charging Edward Fedora with the illegal sale of a Congressional Medal of Honor on July 9, 2003. Fedora is also charged with making a false statement upon his entry into the United States, namely his failure to declare the Medal of Honor upon entering the United States on July 8, 2003. The complaint alleges that the defendant ran a business over the Internet which included the attempted sale of Congressional Medals of Honor which is prohibited under United States law. The complaint charges that from his Mississauga business, Fedora advertised over the Internet the sale of at least two Congressional Medals of Honor for $12,000 and $30,000, respectively. The complaint further alleges that the FBI conducted an undercover investigation which resulted in the purchase and acquisition of one of the medals on May 28, 2003 and culminated in the seizure of the other medal July 8, 2003 during a meeting with Fedora in Buffalo, New York. The complaint also alleges that when Fedora entered the United States on July 8, 2003, he failed to declare the Medal of Honor, denying that he had anything of value when he entered through the Peace Bridge. A plea hearing is scheduled for Nov. 20, 2003.
United States v. Crump and Davis (D. Ore., arrested Nov. 18, 2003)
•Summary: On Nov. 18, 2003, Vernon Ray Crump and Diana Lynn Davis, residents of Oakridge, Oregon, were arrested on Internet fraud and bank fraud related charges. An indictment returned by a federal grand jury in Eugene, Oregon, on Nov. 13, 2003, alleges that Crump and Davis engaged in a conspiracy to commit Internet fraud and a conspiracy to commit bank fraud. The indictment alleges that Crump and Davis advertised certain firearms for sale on an Internet auction site, and fraudulently represented to certain auction participants that they had submitted winning bids in auctions for the firearms. They then allegedly represented to the auction participants that the firearms would be shipped as soon as payment was received. The auction participants then made payment in the form of checks and money orders to Davis, but thereafter never received the firearms. The bank fraud case allegedly involved a scheme to create and negotiate counterfeit checks to federally insured financial institutions.
Pennsylvania - Eastern District
United States v. Carlson (E.D. Pa., arrested Oct. 7, 2003)
•Summary: On Oct. 7, 2003, Allan E. Carlson was arrested pursuant to an indictment returned in the Eastern District of Pennsylvania. Carlson is charged with "hacking" into computers around the country, hijacking or "spoofing" the return addresses of e-mail accounts of reporters at the Philadelphia Inquirer and the Philadelphia Daily News and e-mail accounts at the Philadelphia Phillies, and launching spam e-mail attacks. He is also charged with identity theft for illegally using the e-mail addresses of the reporters.
The indictment charges that Carlson, a disgruntled Philadelphia Phillies fan, hacked into computers of unsuspecting users and from those computers launched spam e-mail attacks with long messages voicing his complaints about the Phillies management. The indictment charges that when launching the spam e-mails, Carlson's list of addressees included numerous bad addresses. When those e-mails arrived at their destinations, the indictment charges that they were "returned" or "bounced" back to the person who purportedly sent them – the persons whose e-mail addresses had been "spoofed" or hijacked. This caused floods of thousands of e-mails into these accounts in a very short period of time.
•Press Release: http://www.usdoj.gov/usao/pae/News/Pr/2003/oct/carlson.html
United States v. Bartlett L. Dehaven, CR 03-0578 (E.D. Pa., pleaded guilty Nov. 18, 2003)
•Summary: On Nov. 18, 2003, Bartlett L. Dehaven pleaded guilty to mail fraud, identity theft and witness-tampering charges in connection with an Internet auction fraud using another person's identity, and an attempt to get another person to lie to the grand jury concerning the merchandise offered for sale. This matter, which was indicted on Sept. 4, 2003, was investigated by the FBI.
Pennsylvania - Western District
United States v. Banks, Criminal No. 03-245 (W.D. Pa., indictment filed Oct. 7, 2003)
•Summary: On Oct. 7, 2003, a federal grand jury in the Western District of Pennsylvania indicted Frederick H. Banks of Pittsburgh, Pennsylvania, on five counts of mail fraud, criminal copyright infringement and money laundering. According to the indictment presented to the court, Banks, using false and fictitious identities and the company names Whirlwind_Soft, Hexagon Records, and H.R. Inc., engaged in a scheme to defraud when he sold copyright-infringing, counterfeit Microsoft software through the internet and Amazon.com. Banks allegedly misrepresented that the software items sold were legal, retail-boxed versions of Microsoft Windows XP Professional, Windows XP Home Edition, Windows 2000 Advanced Server, and Windows SQL Server 2000 Enterprise Edition. Purchasers from Whirlwind_Soft, Hexagon Records, and H.R. Inc. were defrauded when they received copyright-infringing, counterfeit Microsoft software which could not be used legally, instead of genuine Microsoft software. In addition, the indictment alleged that Banks defrauded a software purchaser by delivering worthless software instead of the Microsoft and other software that had been ordered and partially prepaid. As part of this scheme, the indictment alleges that Banks received $30,000.00 from the victim as a deposit on a $294,859.00 software purchase order. $22,000 of that deposit money was the subject of a money laundering charge.
United States v. Diller (W.D. Pa., sentenced Oct. 17, 2003)
•Summary: On Oct. 17, 2003, Jeffrey Diller, a resident of Tarentum, Pennsylvania, was sentenced in federal court in Pittsburgh to five years’ probation together with six months home detention and restitution on his conviction of mail fraud. Diller offered various Beanie babies and other items for sale including Rolex watches on e-Bay and other online auctions. For the period September 1999 through December 2000, Diller accepted money from many buyers and used that money for his personal expenses and did not send the buyers the items they had paid for and purchased. The court also ordered Diller to pay restitution of $18,771.56 to the victims of his scheme.
United States v. Dinges (W.D. Pa., indictment filed Nov. 19, 2003)
•Summary: On Nov. 19, 2003, a federal grand jury in the Western District of Pennsylvania returned a ten-count indictment against Todd Christopher Dinges, charging him with mail fraud. According to the indictment, between May 8, 2003 and September 2, 2003, Dinges offered various high-priced items, such as Bose Lifestyle systems, for sale on eBay. The indictment alleged that Dinges accepted monies from many buyers of the items he listed for sale, but that Dinges, intending to defraud the would-be buyers, did not send them the items for which they had paid.
United States v. Jadhav (W.D. Pa., indictment filed Nov. 19, 2003)
•Summary: On Nov. 19, 2003, a federal grand jury in the Western District of Pennsylvania returned an indictment against Manish Jadhav of Pittsburgh on one count of computer damage (18 U.S.C. § 1030(a)(5)). According to the indictment, Jadhav was charged with a series of computer intrusions into the Paintsquare computer network from June 11, 2002 through July 23, 2002. These numerous intrusions were attempts to deny Internet access to the website of Paintsquare. These denial of service attempts were quickly identified by Paintsquare personnel and corrective actions were implemented that limited their intended economic impact.
United States v. Shannon, (W.D. Pa., information filed Nov. 13, 2003)
•Summary: On Nov. 13, 2003, United States Attorney Mary Beth Buchanan filed an information in the U.S. District Court for the Western District of Pennsylvania that charged Christopher Shannon, a resident of Midland, Pennsylvania, with one count of computer damage (18 U.S.C. § 1030(a)(5)). According to the information, between May 17, 2003 and June 6, 2003, Shannon, intentionally and without authorization, accessed a computer of Med-Fast Pharmacy, L.P., an Internet-based retailer of pharmaceutical products located in Monaca, Pennsylvania, and, in so doing, caused damages in excess of $5,000.00 to Med-Fast and to iServe Technologies, Inc., located in Pittsburgh, Pennsylvania, which provided computer server hosting services to Med-Fast.
United States v. Sherbondy, Criminal No. 03-241 (W.D. Pa., arraigned Oct. 14, 2003)
•Summary: On Oct. 14, 2003, Michael R. Sherbondy of Southwest, Pennsylvania, was arraigned in Pittsburgh on an indictment charging him with two counts of aiding and abetting the distribution of counterfeit software. According to the indictment, Sherbondy allegedly aided and abetted another person who unlawfully distributed counterfeit Microsoft Office 97 Professional Software to the United States Army.
United States v. Smittle, Criminal No. 03-106 (W.D. Pa., arraignment Oct. 1, 2003)
•Summary: On Oct. 1, 2003, Jeffrey S. Smittle was arraigned on a 13-count superseding indictment, returned by the grand jury on Sept. 24, 2003, charging him with Unauthorized Trafficking in Recordings of Live Musical Performances and Trafficking in Counterfeit Labels Affixed to Phonorecords. According to the superseding indictment, on multiple occasions in 2002, Smittle sold unauthorized "bootleg" recordings of live musical performances by various recording artists, including Bob Dylan, Aerosmith, Bruce Springsteen and KISS, and also trafficked in counterfeit labels affixed to certain of those recordings.
Tennessee - Eastern District
United States v. Smith (E.D. Tenn./E.D. Va., sentenced Oct. 6, 2003)
•Summary: On Oct. 6, 2003, K.C. Smith, 21, was sentenced in U.S. District Court to 14 months imprisonment after his plea of guilty to two felony charges of securities fraud. Smith was also ordered to serve three years of supervised release following his term of imprisonment and to pay restitution to defrauded investors in the amount of $75,230.79.
Smith was charged in two felony informations, one originally filed in the U.S. District Court for the Eastern District of Virginia at Alexandria, and the second filed in U.S. District Court in Greeneville, Tennessee. Smith had consented for the charges to be consolidated in the Greeneville court for plea and sentencing. Smith pled guilty to the charges on June 30, 2003.
In factual summaries submitted to the court, Smith admitted to having engaged in two fraudulent schemes through the Internet in 2002. In the first scheme, Smith, while residing in Davie, Florida, in May 2002, created an Internet website for a fictitious enterprise called “Maryland Investment Club,” which claimed to offer potential investors double-digit monthly returns on “high-yield international tax-free” investment opportunities. The website represented that investors would receive monthly profits of 10 percent to percent. The website also represented that “deposits” to Maryland Investment Club were backed by the “Canada Deposit Insurance Corporation” (CDIC). While the CDIC does insure deposits in Canadian banks, CDIC had no connection to Maryland Investment Club and did not insure any deposits or investments.
Smith continued the fraudulent scheme after moving to Johnson City, Tennessee, in June 2002. Smith advertised Maryland Investment Club through the use of unsolicited bulk e-mail, commonly referred to as spam. Smith advertised the Maryland Investment Club website in approximately six million Internet e-mail messages he sent from May through August 2002. In response to the e-mail solicitations and the websites, Smith obtained funds from persons wishing to invest in Maryland Investment Club, obtaining approximately $80,000 from investors.
In July 2002, Smith created a second fictitious website for a business he named “Kryer Financial.” The website contained a false address for Kryer Financial at a commercial building in San Marcos, California, when in fact the only operations of Kryer were conducted by Smith from his home in Tennessee. The website also showed photographs of eight persons who were purportedly employees of Kryer along with descriptions of their extensive business backgrounds. Smith had copied the photographs from other sites on the Internet and had created the false biographical descriptions by copying descriptions from other websites.
The Kryer website invited individuals to invest money with Kryer, claiming that Kryer was a “specialist international fund manager,” and that Kryer “was known for achieving high yields with our aggressive commodity trading abilities in the gold and precious metal market.” A chart represented that the fund had returned an average of 16.25 percent monthly. The website further claimed that all of the individual investors’ principal was guaranteed up to $250,000 by the United States Deposit Insurance Corporation (USDIC), and investors were invited to visit the USDIC website to verify Kryer’s representations. However, USDIC did not exist and its website was another fabrication by Smith. Smith also placed the Securities and Exchange Commission’s seal on the web pages for USDIC to lend the site additional credibility. Smith then used spam e-mails to send an estimated 3 million messages to Internet users advertising Kryer and suggesting that they respond to a Kryer e-mail account. Smith admitted in sworn testimony before the Securities and Exchange Commission in February 2003 that the he had created the websites to obtain funds from potential investors with no intention or ability to pay the returns promised. Smith subsequently agreed to a consent judgment in a related civil enforcement action filed by the Securities and Exchange Commission in the U.S. District Court in Greeneville, Tennessee, on May 12, 2003. Additional information on the SEC’s civil enforcement proceeding can be found at http://www.sec.gov/news/digest/dig051203.txt.
As a condition of his supervised release, Smith may not have access to any computer on-line service or network without the express approval of his probation officer. Smith is also required to allow his probation officer to search his computer to determine compliance with his conditions of supervision and to bear the expense of any hardware or software needed to monitor his computer usage.
Tennessee - Western District
United States v. Perry (W.D. Tenn., indictment filed Nov. 18, 2003)
•Summary: On Nov. 18, 2003, a federal jury in the Western District of Tennessee returned a nine-count indictment charging Shelly S. Perry with violations of 18 U.S.C. § 1341 (mail fraud). The indictment alleges that Perry operated an "Internet Business" having a website address of "www.paylessfurniture.com" from her private residence in Memphis, Tennessee. It also alleges that between February 2003 and November 2003, Perry, through the use of her "Internet Business,” defrauded various individuals, located throughout the country, who were attempting to purchase furniture via the said Internet website, auction sites, and personal contact with the Defendant. The indictment further alleges that, as a result of the defendant’s scheme to defraud, more than 70 citizen victims sent the defendant in excess of $110,000.00.
Texas - Eastern District
United States v. Kopp (E.D. Tex., indictment unsealed Nov. 17, 2003)
•Summary: On Nov. 17, 2003, the U.S. District Court for the Eastern District of Texas unsealed an indictment that a federal grand jury had returned against David D. Kopp, 45. The indictment charged Kopp with 23 counts of wire fraud (18 U.S.C. § 1343) and 22 counts of mail fraud (18 U.S.C. § 1341), for conducting an Internet auction fraud scheme. According to court documents, Kopp advertised auctions on eBay and Yahoo websites in which he claimed to be selling computers and computer parts. Numerous times between February 2002 and January 2003, Kopp allegedly set up auctions and directed the winning bidder to either wire or mail the purchase money. The indictment alleges that Kopp did not intend to deliver the goods that were auctioned and kept the money. The investigation was conducted by the FBI.
Virginia - Eastern District
United States v. Carr (E.D. Va., pleaded guilty Oct. 28, 2003)
•Summary: On Oct. 28, 2003, Helen Carr pleaded guilty in the U.S. District Court for the Eastern District of Virginia to conspiracy to possess unauthorized access devices. Carr engaged in “phishing” by sending fake e-mail messages to America Online (AOL) customers, advising that they must update their credit card/personal information on file with AOL to maintain their accounts. Unwitting victims provided their information to Carr and co-conspirators. George Patterson, a co-conspirator, previously pled guilty to the same charge and was sentenced to 37 months imprisonment.
Wisconsin - Western District
United States v. Applewhite (W.D. Wisconsin, indictment filed Oct. 8, 2003)
•Summary: On Oct. 8, 2003, a federal grand jury returned an indictment against Christina L. Applewhite, charging her with submitting false information to a financial institution (18 U.S.C. § 1014) and misuse of a Social Security number (42 U.S.C. § 408(a)(7)(B)). The indictment alleged that Applewhite had falsely represented a Social Security number as being hers in dealings with financial institutions, AT&T Wireless and other businesses.
United States v. Yetter (W.D. Wisconsin, indictment filed Oct. 29, 2003)
•Summary: On Oct. 29, 2003, a federal grand jury returned an indictment against Benjamin L. Yetter, charging him with violating the mail and wire fraud statutes (18 U.S.C. §§ 1341 and 1343). The indictment alleged that Yetter offered for sale on the Internet motor vehicles, motor vehicle parts, television equipment, or other merchandise for sale, and fraudulently obtained more than $10,000 from victims even though he knew that he had no intention of providing the purchased items.