2002 Annual Report of Investigations of the United States Postal Inspection Service
Our Mission: Safety, Security, Integrity

A Message from the Chief Postal Inspector
December 2002

I am pleased to present this 2002 Annual Report of Investigations of the United States Postal Inspection Service. This report is especially meaningful to me as it is my first Annual Report to the United States Postal Service, its Board of Governors, members of Congress, and the American public since my appointment as the new Chief Postal Inspector in July of this year. "All Americans have the right to mail and receive letters and parcels with every expectation that no one will tamper with or steal their mail. All users of the mail have the right to be protected from mail fraud and other mail-related criminal activities. And all postal employees and customers have the right to work or conduct business in a safe and secure environment." I have taken these words from a new booklet we issued this year: Because the Mail Matters. And the mail does matter--now more than ever, the mail and the security of the mail are critical to the citizens of this country. As traditional mail security concerns expand to meet the challenges of new technology and a new century, I believe that my experience and leadership will help us preserve the nation's trust in the U.S. Mail. Although protecting the mail, postal employees, and customers took on added significance this year, security efforts were only part of our mission. Criminal investigations continued during FY 2002, as Postal Inspectors arrested 10,828 criminal suspects, with 54 percent of the arrests for mail theft. Inspectors also investigated 3,355 mail fraud cases and responded to approximately 84,000 consumer fraud complaints. Mail fraud investigations resulted in 1,634 arrests, approximately $2 billion in court-ordered and voluntary restitution, and 780 civil or administrative actions. In addition to numerous cases involving bombs, threats, and injurious items in the mail, Inspectors arrested 249 suspects for child sexual exploitation offenses related to the mail and 1,385 suspects for drug trafficking and money laundering via the mail. Safeguarding the U.S. Postal Service's revenue and assets is integral to the mission of the Postal Inspection Service. Through our investigations of workers' compensation fraud this fiscal year, Postal Inspectors reported $108.4 million in long-term and continuation-of-pay cost-avoidance savings for the Postal Service. The U.S. Postal Inspection Service is proud of its accomplishments. We look forward to future opportunities to continue building on our strengths--preserving the safety, security, and integrity of the U.S. Postal Service, postal employees, and postal assets--and ensuring America's confidence in the U.S. Mail. Lee R. Heath Introduction Opening quote: The U.S. Postal Service delivers more than 200 billion pieces of mail a year, containing money, messages, and merchandise, to 138 million addresses at some of the most affordable postage rates in the world. U.S. Postal Inspectors are mandated to safeguard all of it--including the people who move it and the customers who use it--and it's all included in the price of a stamp. As one of our country's oldest federal law enforcement agencies, founded by Benjamin Franklin, the United States Postal Inspection Service has a long, proud and successful history of fighting criminals who attack our nation's postal system and misuse it to defraud, endanger, or otherwise threaten the American public. As the law enforcement and security arm of the United States Postal Service, the U.S. Postal Inspection Service is a highly specialized, professional organization performing investigative and security functions essential to a stable and sound postal system. Congress empowered the Postal Service "to investigate postal offenses and civil matters relating to the Postal Service." Through its security and enforcement functions, the Postal Inspection Service provides assurances to American businesses for the safe exchange of funds and securities through the U.S. Mail; to postal customers of the "sanctity of the seal" in transmitting correspondence and messages; and to postal employees of a safe work environment. As fact-finding and investigative agents, Postal Inspectors are federal law enforcement officers who carry firearms, make arrests, execute federal search warrants, and serve subpoenas. Inspectors work closely with U.S. Attorneys, other law enforcement agencies, and local prosecutors to investigate postal cases and prepare them for court. There are approximately 1,900 Postal Inspectors stationed throughout the United States who enforce roughly 200 federal laws covering investigations of crimes that adversely affect or fraudulently use the U.S. Mail and postal system. To assist in carrying out its responsibilities, the Postal Inspection Service maintains a Security Force staffed by roughly 1,400 uniformed Postal Police Officers who are assigned to critical postal facilities throughout the country. The officers provide perimeter security, escort high-value mail shipments and perform other essential protective functions. The Postal Inspection Service operates four forensic crime laboratories strategically located in cities across the country. The labs are staffed with forensic scientists and technical specialists, who assist Inspectors in analyzing evidentiary material needed for identifying and tracking criminal suspects and in providing expert testimony for cases going to trial. The Inspection Service's approximately 800 professional and technical employees, who include forensic specialists, information technology experts, financial analysts and others, play a vital role in supporting the criminal investigative and security functions of the Postal Inspection Service. They perform a wide variety of tasks, including developing and continually upgrading information systems; providing forensic examinations of evidence; deploying electronic security and surveillance equipment; publishing policy handbooks and consumer awareness guides; supplying photography and video services; and facilitating direct communications with Congress and the public. During this fiscal year, the National Headquarters offices of the Postal Inspection Service were organized in functional groups that reported to Deputy Chief Inspectors for Investigations, Security and Information Technology, and Professional Standards and Resource Development. The Postal Inspection Service's 18 field divisions reported directly to three Deputy Chief Inspectors for field operations. Field offices were supported by five Inspection Service Operations Support Groups. The Inspection Service's Executive Committee, which comprised the Chief Postal Inspector, five Deputy Chief Inspectors and the three Inspectors in Charge who report directly to the Chief Postal Inspector, established the direction of the organization. The National Leadership Team consisted of the Deputy Chief Inspectors and all Inspectors in Charge. In the upcoming fiscal year, the National Headquarters offices of the Postal Inspection Service will be organized in functional groups that report to the Deputy Chief Inspector for Headquarters Operations. The Postal Inspection Service will continue to have 18 field divisions, which will report directly to three Deputy Chief Inspectors for field operations. Field offices will be supported by five Inspection Service Operations Support Groups. The National Leadership Team will include four Deputy Chief Inspectors, two Assistant Chief Inspectors, Inspectors in Charge, and all Postal Career Executive Service Managers. The Postal Inspection Service's national information technology infrastructure supports about 4,200 users at more than 180 sites nationwide. Inspection Service offices are linked nationally via a dedicated frame-relay network, with online connections to the Postal Service, the National Crime Information Center, the National Law Enforcement Telecommunications System, and the Internet. The Internal Affairs Division's mission is to promote integrity and excellence in the Postal Inspection Service through independent internal investigations of its employees and protect the safety of postal employees and customers by providing security and preventive services at National Headquarters. The Office of Counsel provides legal advice and services in support of Postal Inspection Service investigations, programs, and goals; processes requests for access to Inspection Service records; and provides legal training to Inspection Service personnel. The Counsel's office comprises 20 Inspector-Attorneys supported by an administrative staff that includes paralegals, information disclosure specialists, a labor relations analyst, a program specialist, and an administrative support specialist. Charged with managing the Postal Inspection Service's internal and external communications, staff from Congressional and Public Affairs (C&PA) issue news and video releases covering investigations or events of national interest and develop publications with preventive and informational tips related to mail fraud and other mail crimes for postal employees and the public. C&PA personnel represent Inspection Service interests on Capitol Hill and through liaison efforts with other government, law enforcement, and consumer agencies. C&PA's Internet Web site provides weekly investigative news and consumer-oriented tips. Postal customers may report suspected incidents of mail fraud online at www.usps.com/postalinspectors. An Intranet Web site, maintained by the Information Technology Division, facilitates employee communications nationwide. The U.S. Postal Inspection Service extends full cooperation to all federal, state, and local investigative and prosecutive authorities in law enforcement matters to ensure greater protection to the public. Postal Inspectors regularly participate in joint task force investigations with other agencies aimed at curtailing widespread criminal acts of an organized nature. For more information on the Postal Inspection Service, visit our Web site at www.usps.com/postalinspectors. Leadership Team of the United States Postal Inspection Service FY 2002 L. Heath, Chief Postal Inspector J. Birch, Executive Ombudsman L. Katz, Inspector in Charge, Office of Counsel I. Gillis, Executive Coach J. Rowan, Deputy Chief Inspector, Headquarters Operations D. Mihalko, Inspector in Charge, Congressional & Public Affairs R. Geffen, Inspector in Charge, Forensic & Technical Services R. Muehlberger, Laboratory Director T. Denneny, Inspector in Charge, Internal Affairs L. Spallanzani, Manager, Strategic Planning & Management Processes A. Clemmons, Assistant Chief Inspector, Investigations & Security K. Bond, Inspector in Charge, Group 1, Safety K. Roberts, Inspector in Charge, Group 2, Security L. Maxwell, Inspector in Charge, Group 3, Integrity Z. Hill, Inspector in Charge, Group 4, Emergency Preparedness D. Hill, Inspector in Charge, Group 5, International Affairs T. Van de Merlen, Acting Inspector in Charge, Group 6, Intelligence N. Johnson, Assistant Chief Inspector, Administrative Operations V. Bellinger, Manager, Human Resources Performance F. Toogood, Inspector in Charge, Career Development L. Visos, Inspector in Charge, Finance & Administrative Services R. Coccia, Inspector in Charge, Information Technology K. Burke, Deputy Chief Inspector, Field Operations, East Inspectors in Charge Mid-Atlantic, A. Crawford Northeast, K. Jones North Jersey/Caribbean, M. Phanco New York, W. Kezer Philadelphia, I. Carle Washington, T. Brady Western Allegheny, R. Dalgleish W. Mitchell, Deputy Chief Inspector, Field Operations, South Inspectors in Charge Florida, J. Belz Gulf Coast, R. Dodd Rocky Mountain, M. Cobos Southeast, D. Collins Southwest, A. Holmes M. Ahern, Deputy Chief Inspector, Field Operations, West Inspectors in Charge Detroit, Y. Allen Midwest, R. Bowdren San Francisco, A. Kiel Chicago, A. Davidson Northwest, R. Morgan Southern California, J. Somerset Mail Theft Opening quote: Postal Inspectors arrested 5,858 suspects for mail theft in FY 2002, with volume mail theft receiving the highest level of investigative attention. The American public has the right to expect its mail to be delivered on time and intact. As mandated by law, U.S. Mail should arrive unopened and in the mail receptacle for which it was intended. Mail theft comes under the jurisdiction of U.S. Postal Inspectors, who are charged with preserving the "sanctity of the seal." Mail thieves have a number of opportunities to steal mail. Every day, more than 650 million letters travel across the country and around the globe. The mail is delivered to 145 million addresses six days of every week. And every day those millions of mailpieces--First-Class letters, parcels, magazines, financial documents, business correspondence, Express and Priority Mail, registered mail, international mail and much more--are moved to their destinations by plane, ship, rail, truck, automobile and human beings. U.S. Mail is delivered to many different types of receptacles: mailboxes, collection boxes, apartment mailbox panels, relay boxes, co-op mailing racks, post office boxes, neighborhood delivery and collection box units, as well as countless varieties of ingenious, homemade mailboxes crafted to meet the federal standards set by the U.S. Postal Service, under the counsel of U.S. Postal Inspectors. Postal Inspectors know all this. They also know that, because mail can contain any number of valuables--not just jewelry and other expensive items, but personal and financial information, credit card applications and the like--criminals will always try to steal it. Mail thieves employ an endless number of schemes that Postal Inspectors work hard to thwart. The Postal Inspection Service devotes significant resources to investigating and preventing mail theft. Mail theft rings are the agency's biggest concern. While mail is in transit at airports or on the road, highly organized criminal groups--who may recruit airline employees, postal contractors or postal employees to aid them--can make off with large volumes of mail. U.S. Postal Inspectors deploy the best security technology available. Additionally, they initiate preventive tactics that help protect and educate postal employees and the public about mail theft. The following case examples summarize Postal Inspection Service investigations of mail theft that occurred during FY 2002. • Ten people were sentenced in April 2002 after Inspectors from the Gulf Coast Division investigated complaints that high-dollar business checks had been stolen from the mail. Inspectors determined the suspects deposited the stolen checks into brokerage accounts and later wired money from the accounts into bank accounts they controlled. Losses attributed to the ring exceeded $1.5 million. Prison sentences for ring members ranged from six to 84 months' incarceration. • Six Detroit-area residents were indicted by a federal grand jury on May 30, 2002, for mail theft, conspiracy, bank fraud, and counterfeiting securities of a financial organization. In May 2000, Postal Inspectors from the Detroit Division began investigating complaints of mail stolen from corporate offices and counterfeit-check activity exceeding $180,000. One suspect admitted to stealing mail, manufacturing and negotiating counterfeit checks, and supplying the checks to others. • Postal Inspectors from the New York Division and officers from the New York City Police Department and Drug Enforcement Agency arrested six members of an organized ring in May 2002 whose members stole credit cards from the mail. Inspectors initially received a complaint in August 2000 after a suspect purchased a Lincoln Navigator using a stolen credit card for the down payment. Inspectors traced other stolen credit cards used by the ring to purchase computers, jewelry, and tools. • Postal Inspectors and officers from the Hialeah, Florida, Police Department arrested two suspects in May 2002 for mail theft. Investigators executing a search warrant at a suspect's residence recovered more than 100 pieces of stolen mail and 30 credit cards, 50 counterfeit driver's licenses, equipment to produce fraudulent driver's licenses (including more than 1,000 blank plastic cards and Holograms for cards), and computer equipment. The evidence indicated the suspects were using financial information from stolen mail to produce fraudulent IDs and apply for credit cards. They directed fraudulent credit card applications to be mailed to two addresses they controlled. • Postal Inspectors from the Mid-Atlantic Division arrested a suspect on June 6, 2002, for stealing blank checks, bank statements, bill payments, and other financial information from unlocked rural mailboxes throughout North Carolina. Losses are estimated at $161,000, and the investigation is continuing. • The last of 10 members of an organized gang indicted in October 1997 was sentenced on May 20, 2002, to more than 10 years in prison, two years' supervised release, and restitution of $258,568. The investigation began in 1996 when Detroit Inspectors received complaints from postal customers whose personal checks had been stolen from the mail. More than 250 checking accounts were compromised by the ring, and merchants lost more than $350,000. Volume Mail Attacks Postal vehicles, collection and relay boxes, apartment mailbox panels, and neighborhood delivery and collection box units are common targets of volume mail attacks. Volume mail attacks constitute an ongoing threat to postal customers and receive a high level of investigative attention. The following are examples of volume mail attacks investigated and halted by Postal Inspectors during FY 2002. • Postal Inspectors from the Washington Division initiated a surveillance of a Fairfax, Virginia, apartment complex on July 16, 2002. They observed a Nigerian national exit his car, retrieve a butter knife from the trunk, and enter an apartment building. He then forcibly opened several apartment mailboxes and stole numerous pieces of mail. Inspectors arrested the man as he returned to his vehicle and recovered from him stolen U.S. Mail, stolen credit cards, and the knife. Losses from the scheme exceeded $250,000. • After weeks of surveillance and investigation, Postal Inspectors in New Jersey arrested five men in June 2002 for mail theft. Inspectors secured written confessions from the men admitting they had broken into more than a dozen postal relay boxes. They also recovered tools used to break into the boxes and false IDs used to negotiate checks stolen from the mail. The group stole more than 20 feet of mail between April and June 2002 and cashed thousands of dollars in stolen checks at local bodegas and liquor stores. Prosecution of four of the men is pending in federal court at Newark, and additional arrests are anticipated. • On June 18, 2002, Postal Inspectors from the Chicago Division conducted a surveillance that resulted in the arrest of a mail theft recidivist for stealing credit cards from apartment panel boxes. A search of the suspect and her vehicle resulted in the recovery of four credit cards stolen from the mail, screwdrivers, and handwritten notes listing the personal identifiers of numerous mail theft victims. Inspectors later executed a federal search warrant at her residence and seized stolen mail and papers listing victims' names, Social Security numbers, and credit card numbers. • Postal Inspectors arrested two suspects on March 13, 2002, for possessing stolen mail after investigating post office box break-ins throughout the Phoenix area. Phoenix Indian School Station postal employees saw two men enter the facility and break into post office boxes. They called Phoenix police, who stopped the suspect's vehicle and recovered approximately 100 pieces of mail, which included bank statements, credit card applications, and convenience checks. Postal Inspectors responded to the scene and interviewed the suspects about their involvement in other area volume attacks. The investigation is continuing. Graph Volume Mail Attacks: Five-Year Trend FY 98: 4,550 FY 99: 3,435 FY 00: 3,929 FY 01: 6,752 FY 02: Identity Theft Identity theft occurs when a thief steals key pieces of someone's identifying information, such as name, date of birth, and Social Security number, and uses the information to fraudulently apply for credit or to take over a victim's credit or bank accounts. The majority of identity theft schemes involve the U.S. Mail. Postal Inspectors work with bank and credit card issuers, financial institutions, retail merchants, credit bureaus, and government agencies to educate merchants and consumers about identity theft and provide guidance to victims. Examples of Inspection Service cases investigated during FY 2002 follow. • Detroit Postal Inspectors investigated a gang of mail theft recidivists who were recruiting street people, called "runners," to obtain cash advances from banks and casinos via credit cards. Inspectors executed a search warrant at the residence of a suspect in January 2002 and recovered more than 180 documents listing victims' personal IDs. Inspectors and agents from the Detroit Metro Identity Theft Task Force identified and arrested the ringleader of the group who, at the time of his arrest, had more than 700 car rental applications with names, dates of birth, Social Security numbers, and credit card accounts of potential victims. The ringleader and a cohort reportedly called credit card issuers, purporting to be the true account holders, and requested that replacement credit cards be mailed to them. The car rental manager who supplied the rental applications and an employee who worked at a health plan office were later indicted for providing documents to the gang. Total fraud losses exceeded $700,000. • An Illinois man was sentenced on May 1, 2002, to 25 months in prison and ordered to forfeit $590,000 in assets to banks after pleading guilty to the unlawful possession of an access device, mail fraud, and bank fraud. A joint investigation by Postal Inspectors and special agents of the Social Security Administration determined he had fraudulently applied for more than 200 credit cards using numerous victim IDs. • The Minnesota Financial Crimes Task Force, which includes Postal Inspectors, Secret Service agents, and local law enforcement officers, arrested a Nigerian national on March 8, 2002, for a $1 million account-takeover scheme. Postal Inspectors executed a federal search warrant at the suspect's residence and recovered approximately $16,000 in cash, three vehicles, artwork, electronics equipment, and merchandise derived from the scheme. An investigation revealed the man used bank employees to identify high-dollar, dormant accounts with balances of $100,000 or greater for his scheme, and shipped the fraudulently obtained merchandise to his home in Nigeria. • Postal Inspectors in Jacksonville, Florida, arrested six people believed to be running a major identity theft ring. The arrests were the result of a joint investigation by the Northeast Florida High Tech Task Force, which includes Postal Inspectors, members of the Jacksonville Sheriff's Office, and several other federal, state, and local law enforcement agencies. Victims of the ring included employees of the Winn-Dixie Corporation and Hollywood, Florida, police and fire departments. The six suspects were charged with 44 counts of violations related to the Racketeering Influenced Corrupt Organization (RICO) Act, including criminal use of personal information, grand theft, organized fraud, and manufacturing fraudulent IDs. On May 27, 2002, one of the suspects pled guilty to RICO violations and related charges. • Las Vegas police arrested a man in June 2002 for "driving under the influence" and later discovered he had an outstanding arrest warrant for identity theft in Arizona. Postal Inspectors from the Phoenix Field Office reported he stole a person's Social Security number, applied for numerous credit cards in the victim's name, and had the cards mailed to a box he rented at a commercial mail receiving agency (CMRA). Inspectors and Secret Service agents searched the man's business and discovered numerous fraudulent documents, lists of Social Security numbers, and names of numerous potential identity theft victims. The man collected more than $307,000 from the scheme. • Postal Inspectors identified 70 customers of a U-Haul Rental Center in New Haven, Connecticut, as victims of an identity theft scheme. Two U-Haul employees had disclosed confidential customer information to cohorts, who then obtained and used credit cards in victims' names. Inspectors searched one suspect's residence and recovered notebooks containing credit card numbers, addresses, and places of employment for 396 victims, as well as a Mazda van purchased with one of the fraudulent credit cards. On January 14, 2002, the two U-Haul employees pled guilty to four counts of identity fraud, conspiracy, and access-device fraud. Inspectors identified other suspects in the scheme, and the investigation is continuing. Victim losses to date exceed $400,000. Quote: Inspectors from the San Francisco Division and agents from the U.S. Secret Service executed a search warrant at a residence believed to be used by members of an identity theft ring. Investigators seized more than 400 pieces of stolen U.S. Mail and IDs during the search, as well as the counterfeit postal keys and the letter carrier uniforms shown here. It is believed that ring members wore the letter carrier uniforms and reproduced postal keys in order to steal mail. Inspectors arrested two suspects in September 2002, and the investigation is continuing. Credit Card Theft • An eight-month investigation by the Postal Inspection Service, New York City Police Department, Queens District Attorney's Office, and investigators from several financial institutions and credit card companies resulted in the execution of 25 search warrants at local businesses and banks and the arrest of eight merchants in Queens on June 12, 2002. Investigators developed information that several collusive merchants split the proceeds of transactions made with fraudulent or stolen credit cards. Losses linked to the investigation are estimated at $5 million. • Two men were arrested by Postal Inspectors in Hartford, Connecticut, for using personal IDs of customers of a truck rental company to fraudulently obtain credit cards. The men used the cards to order thousands of dollars worth of merchandise that was shipped via the U.S. Mail. Inspectors identified 70 victims with combined losses of $223,526. In July 2002, one man was sentenced to 38 months in prison and the other to 30 months in prison. • On July 12, 2002, New Jersey Postal Inspectors, agents from the FBI and Social Security Administration, and members of the Livingston Police Department arrested a man for credit card fraud and identity theft. A department store employee allegedly stole sales receipts containing credit card numbers and other customer information and provided them to Liberian nationals. The Liberians used the stolen information to order computer parts and other merchandise over the Internet and had it mailed to addresses they controlled. Credit card companies reported approximately $300,000 in losses. Employee Mail Theft The overwhelming majority of Postal Service employees work conscientiously to move the nation's mail to its proper destination. They take their responsibilities seriously. Unfortunately, a small number of employees abuse the public's trust. It is the job of the Postal Inspection Service to identify dishonest employees and take steps to have them prosecuted and removed from the Postal Service. Following are examples of employee mail thefts investigated and halted by Postal Inspectors during FY 2002. • On June 14, 2002, a former mail handler at the Tampa, Florida, Processing and Distribution Center (P&DC) was sentenced to 18 months in prison, three years' supervised release, and restitution of $21,295 to Netflix, Inc., an online DVD rental company that mails millions of DVDs to addresses throughout the country. After numerous complaints from Netflix about missing DVDs that customers claimed they had mailed back to the company, Postal Inspectors identified the postal employee in November 2001 for the crime. Inspectors recovered thousands of the company's DVDs while searching the subject's vehicle and residence, with losses exceeding $100,000. As a result of this investigation, Postal Inspectors are now working closely with Netflix on a national level to increase mail security. • A former registry clerk who was a 25-year employee was sentenced on March 4, 2002, to 41 months in prison, three years' supervised release, and restitution of $497,014 after pleading guilty in November 2001. Postal Inspectors arrested the former clerk in August 2001 for stealing $3.2 million in registered remittances from the Phoenix, Arizona, P&DC. He was sentenced at the high end of the sentencing guidelines because, as an employee of the U.S. Postal Service, he abused the public's trust. • After a four-day jury trial in Arizona in May 2002, a former associate postal supervisor was found guilty of stealing public property. The supervisor resigned from her position after an investigation by Postal Inspectors in October 1999 implicated her in the theft of a $59,723 remittance from the Chandler Post Office; $20,095 of the remittance was in cash. During the trial, the supervisor's version of events surrounding the loss was refuted by numerous witnesses, as well as by physical evidence from the investigation. She faces up to 27 months in prison based on federal sentencing guidelines. Miscellaneous Crimes • Postal Inspectors from Washington, DC; Michigan; and Florida arrested the ringleader and two co-conspirators of a counterfeit postal money order operation on July 2, 2002. They identified losses in excess of $350,000 and involving more than 600 counterfeit, negotiated postal money orders. Prosecutions are underway in federal district courts in Washington, DC, and Michigan. • Acting on a lead from an alert window clerk, Postal Inspectors initiated an investigation into the suspicious check-cashing activity of a ring in Southern California. Members used the names and addresses of area businesses to lull postal clerks into accepting high-dollar business checks for stamp purchases, and the ringleaders used legitimate couriers to further insulate themselves from detection. Inspectors confirmed that losses of $143,000 were directly attributable to the counterfeiters, who were suspected of being responsible for an additional $200,000 in losses from another scheme. Eight members of the ring received sentences in August 2002 ranging from two years' probation to 37 months in prison. • Postal Inspectors, U.S. Marshals, and Deer Park, Texas, police arrested a man in November 2001 for possessing counterfeit law enforcement badges and credentials, as well as handguns and a silencer. One of the counterfeit badges read "Postal Service Special Investigator." Police learned of his activities after he displayed a fake badge at a local bar and identified himself as a Deputy U.S. Marshal conducting an anthrax investigation. He also attempted to force a female patron from the bar. The man was sentenced on April 8, 2002, to 30 months in prison and three years' supervised release for impersonating a federal law enforcement officer and for various firearms violations. Quote: Postal Inspectors in Pasadena, California, concluded a three-year investigation in September 2002 with the convictions of 12 men and women responsible for manufacturing and cashing in excess of $1.2 million in counterfeit postal money orders. Inspectors identified two members of the "Pasadena Devil Lane Bloods" gang as ringleaders of a group that used legitimate postal money orders to produce counterfeit versions, which were cashed at post offices, financial institutions, and stores. Inspectors seized $25,218 in cash, $72,000 in counterfeit postal money orders, a 1998 Lexus, and various illegal narcotics. Violent Crimes Opening quote: For the first time ever, there were no mail bomb incidents during the fiscal year. Homicides, Assaults and Threats The U.S. Postal Inspection Service is committed to ensuring employee safety in the workplace. Postal Inspectors reported 714 postal-related assaults and credible threats during FY 2002 and made 325 arrests. Inspectors seek prosecution in assault cases when appropriate. Following are examples of investigations by Postal Inspectors during FY 2002. • A man was sentenced in June 2002 to more than 10 years in prison and three years' supervised release after shooting a Los Angeles letter carrier on March 7, 1997, as the carrier delivered mail on his route. The shooter fled and remained a fugitive for four years, until he was arrested in July 2001 by Inspectors from the Southern California Division's Major Crimes Team. The shooter must pay restitution of $9,707 to the carrier. • Two men who had been arrested by Postal Inspectors were sentenced on June 17, 2002, after entering guilty pleas to the May 2001 kidnapping and sexual assault of a Tennessee postmaster. On the basis of their "extreme conduct," the judge ordered the maximum sentence of more than 40 years in federal prison for one of the assailants and more than 26 years in prison for his cohort. • Postal Inspectors are continuing their investigation into the murder of a Tulsa, Oklahoma, letter carrier, who was shot in the back while delivering mail. Inspectors arrested a suspect on the day of the murder in December 2001, when they found him carrying a revolver a few blocks from the crime scene. After the suspect pled not guilty in August 2002, a special, non-jury trial held that day ruled he was innocent by reason of insanity. • A postal customer in Chicago, Illinois, struck a letter carrier on the head with a blunt instrument as the carrier delivered mail on her route in June 2002. As a result of the attack, the carrier received eight stitches to her head. She was able to provide Postal Inspectors and Chicago police with information on the incident, and they identified her assailant and took him into custody. He was admitted to Mt. Sinai Hospital for psychological evaluation and, on July 29, formally arrested by Chicago Division Postal Inspectors pursuant to a federal criminal complaint and warrant. Graph Assaults & Threats: Five-Year Trend FY 98: 1,255 FY 99: 1,063 FY 00: 1,037 FY 01: 799 FY 02: Mail Bombs and Other Prohibited Mail Mail Bombs Historically, the motives for mail bombs and bomb threats often have related to personal and business disputes, with revenge being the common thread. In the interest of protecting postal employees and customers, the Postal Inspection Service considers the investigation of mail bombs among its highest priorities. In FY 2002, Postal Inspectors arrested 65 suspects in incidents related to mail bombs or bomb threats, including threats made against postal facilities, hoax devices, suspicious items in the mail, and bombs or explosive devices placed in private mail receptacles. For the first time ever, there were no mail bomb incidents during the fiscal year. A man who mailed two bombs in July 2001 was sentenced to 18 years in federal prison, three years' probation, and $25,645 in restitution to his ex-wife. He mailed one bomb to his ex-wife at her place of employment and a second bomb to one of her co-workers. Fortunately, neither was seriously injured by the explosions that resulted when they opened the mail. Postal Inspectors located the man and obtained a signed confession from him within 24 hours of the detonations. Click here to read Anthony Fu Yin Chang Wanted Poster. Graph Mail Bomb Incidents: Five-Year Trend FY 98: 7 Incidents, 3 Explosions, 3 Injuries, 1 Death FY 99: 6 Incidents, 2 Explosions, 0 Injuries, 0 Deaths FY 00: 7 Incidents, 4 Explosions, 2 Injuries, 0 Deaths FY 01: 3 Incidents, 3 Explosions, 2 Injuries, 1 Death FY 02: 0 Incidents, 0 Explosions, 0 Injuries, 0 Deaths Quote: The Inspector in Charge of the Midwest Division and the Kansas City Field Office Inspector in Charge held a press conference on May 7, 2002, after pipe bombing suspect Luke Helder was arrested and taken into custody 20 miles east of Reno. Charges were filed against Helder in Iowa, Illinois, and Nebraska for using an explosive device to damage or destroy property involved in interstate commerce and resulting in personal injury, and for using a destructive device. Helder entered a plea of not guilty on June 7, 2002, but a trial date has not yet been set. Bomb Threats, Hoaxes, and Placed Devices Less than 36 hours after receiving a report of a pipe bomb explosion on May 3, 2002, in a rural mailbox at Eldridge, Iowa, more than 150 Postal Inspectors joined forces with FBI agents and local law enforcement officers to investigate the crime. Six people, including four rural route carriers and two postal customers, were injured when six of 18 bombs placed in rural mailboxes across the Midwest exploded. Following an intense manhunt that relied on Inspection Service resources nationwide, John Lucas Helder, a 21-year-old engineering student enrolled at the University of Wisconsin-Stout, was identified as the alleged bomber. Helder was arrested and taken into custody on May 7, 2002, by federal agents and members of the Nevada Highway Patrol after he was spotted in his 1992 Honda Civic approximately 20 miles east of Reno. He was armed with a rifle at the time of his arrest. Charges were filed against Helder in Iowa, Illinois, and Nebraska for using an explosive device to damage or destroy property involved in interstate commerce and resulting in personal injury, and for using a destructive device. On June 5, a federal grand jury in the Northern District of Iowa indicted Helder on two criminal counts: using an explosive device to maliciously destroy property used in interstate commerce (a rural mailbox) and using a firearm (pipe bomb) to commit a crime of violence. The indictment was tied to injuries sustained by a woman and her husband when she reached into their rural mailbox on May 3 and discovered a pipe bomb, which exploded. Helder entered a plea of not guilty on June 7, 2002, but a trial date has not yet been set. In another incident in May 2002, Postal Inspectors arrested a former postal employee for making a bomb threat to the Morgan Processing & Distribution Center in New York. Inspectors determined the man had previously worked as a mail handler at the Murray Hill Station, but was fired in 1997 for threatening to shoot fellow employees. On January 13, 2002, a caller to the New York Police Department's "911" emergency hot line stated: "There is a bomb in the Morgan Post Office." Postal Inspectors initiated an investigation that led to an exhaustive review of cellular telephone records and to the identification of the suspect, who is being held in custody in lieu of bail pending psychiatric evaluation. Other Prohibited Mail One strategy adopted by the Postal Inspection Service in response to the October 2001 anthrax mailings was the creation of an interactive, Web-based application for tracking anthrax incidents across the country. The Anthrax Reporting Incident System (ARIS) was the product of a task force comprising Inspection Service representatives from the Corporate Information Management Division, Information Technology Division, Mail Theft and Violent Crimes Division, and various field divisions. ARIS allows Inspectors to track and report anthrax incidents quickly and accurately, in a format easily disseminated to senior-level Postal Service officials. It also provides a formal declaration to alert postal managers when mail must be removed from the mailstream for an extended period of time. Following the October 2001 anthrax mailings, Postal Inspectors responded to an unprecedented 17,735 hoax mailings. Perhaps the most notorious of these was the case of Clayton Lee Waagner, arrested by Postal Inspectors on December 5, 2001, in Cincinnati, Ohio, on charges that he mailed hundreds of anthrax hoax letters to women's health clinics nationwide. During the investigation, Inspectors conducted surveillances of the suspect, monitored his telephone calls, and executed search warrants at his residence. Among other items found was a Postal Inspector's ID card bearing Waagner's photo. America's Most Wanted aired a show about the fugitive in December 2001, and Inspectors from the Pittsburgh area staffed the call room for the show. Waagner was indicted on September 19, 2002, in Pennsylvania for violating the Freedom of Access to Clinic Entrances Act, threatening to use a weapon of mass destruction, extortion, mailing threatening communications, and mailing threatening interstate communications. Other examples of prohibited mailings investigated by Postal Inspectors in FY 2002 follow. • An inmate at the State Correctional Institute in Albion, Pennsylvania, was sentenced in July 2002 to 40 months in prison and three years' supervised release for mailing an anthrax hoax, consisting of powdered sugar and a threatening letter, to the Pennsylvania Probation and Parole Board in Harrisburg. Postal Inspectors determined the sender was already serving a 20-year sentence for previous violent crimes at the time of the mailing, which qualified him as a career offender and raised his sentencing guidelines. He was additionally ordered to pay $4,191 in restitution for damages to the clothing of a mailroom employee and for costs related to a Hazardous Materials Team response. • A Lafayette, Louisiana, man was indicted in June 2002 on 78 counts, including transmitting threats through interstate commerce, mailing threatening communications, and threatening to use weapons of mass destruction. A joint investigation by Postal Inspectors and FBI agents determined he had mailed more than 200 hoax bomb and anthrax letters in April 2002 and sent threatening e-mails in June 2002. Bail was denied due to the suspect's mental state and the danger he represented to himself and society. • A former mail handler at the Cicero, Illinois, Post Office was sentenced on May 16, 2002, to three years' probation and four months' home confinement for mailing a threatening communication. He was indicted in November 2001 after Postal Inspectors reported that he wrote "Anthrax Enclosed" on a parcel that was received by a postal customer at the Cicero Branch of the Chicago Post Office in October 2001. Quote: Among many other duties, Postal Inspectors responded to more than 17,000 hoaxes and helped evacuate 600 post offices since October 2001. - The Federal Times, September 9, 2002. Quote: After America's Most Wanted aired a show on the anthrax hoax mailings, Postal Inspectors staffed the show's phone-in Tipline over a three-month period to respond to callers and follow up on leads. Quote: Postal Inspectors followed biohazard procedures developed by the Centers for Disease Control and Prevention to enter the Trenton, New Jersey, Post Office, which was closed on October 18, 2001, due to anthrax contamination. Quote: Postal Inspectors at the Bellmawr, New Jersey, Post Office, which was closed during the anthrax crisis. Robberies and Burglaries Robberies Robberies are a threat to postal employees, jeopardize the public's trust in the mail, and attack the financial integrity of the Postal Service. Postal Inspectors in all parts of the country receive expert training on how to safeguard both employees and facilities against criminals, but the U.S. Mail will likely always remain a compelling target for larceny. Thieves who attack letter carriers seek mail containing valuables--such as jewelry, checks or financial information--or keys to mail receptacles that give them greater access to even more mail; those who target postal facilities are usually after cash and money orders. Postal Inspectors also investigate robberies of postal remittances and trucks (as well as "highway contract route" trucks) that transport valuable registered mail. This type of robbery often depends on the "inside" knowledge of a postal employee, who can provide important details to an accomplice on truck arrivals and departures. Statistics for robberies that occurred in the past two fiscal years are shown in the chart at bottom, and five-year robbery trends are depicted in the graph at left. Following are examples of robberies investigated by Postal Inspectors in FY 2002. • Postal Inspectors arrested two suspects for the July 1, 2002, robbery of the Fredericktown, Ohio, Post Office. The facility's Officer in Charge (OIC) was punched in the face and robbed of $1,115 in postal funds. He was taken to the hospital by an emergency response squad, treated, and later released. Both suspects admitted their involvement in the robbery, and one of them admitted to striking the OIC. The investigation is continuing, and federal prosecution is anticipated. • On June 20, 2002, an Alabama man was sentenced to 70 months in prison and three years of supervised release for the December 2001 robbery of a letter carrier from the Prichard Branch Post Office. The robber wore a bandana over his face, claimed he had a weapon, and demanded a parcel the carrier was in the process of delivering. The robber was on parole at the time of the incident after serving 10 years for armed robbery. • An Ohio man was sentenced in May 2002 to 96 months in prison, three years' supervised release, and restitution to the Postal Service of $613. Postal Inspectors identified him as responsible for the May 2001 armed robbery of the Northridge Branch Post Office in Dayton. • A letter carrier on duty at the San Francisco P&DC was robbed and assaulted and his postal truck was hijacked in April 2002. Three suspects entered the postal truck, one assaulting the carrier and demanding money. Another suspect pushed the carrier out of the vehicle while the third hijacker jumped behind the wheel of the truck. The men drove off with the truck and its contents, including mail and postal keys; the carrier suffered minor physical injuries. Postal Inspectors and local authorities recovered the truck and located and arrested the three suspects. Two of the men pled guilty in July 2002 and are awaiting sentencing. The third suspect was sentenced in September 2002 to nine years in the custody of the California Youth Authority. • Postal Inspectors arrested a suspect on September 11, 2002, wanted in connection with the armed robbery of the Elizabethport Station Post Office in New Jersey. The robbery occurred on September 3, 2002, when two men, one brandishing a large knife, forced their way into the rear of the post office and demanded the station's funds. More than $48,000 in cash and $1,000 in checks were stolen, but there were no injuries. Two days later, a suspect connected with the case was remanded to the custody of U.S. Marshals pending a detention hearing, and a federal arrest warrant was issued for a second man. All efforts are being made to locate the second suspect at this time. Inspectors recovered more than $9,000 in cash and watches from the robbery. • A man and a woman pleaded guilty to the August 2001 robbery of the Tigerville, South Carolina, Post Office. They were sentenced in April 2002 for robbing the post office and possessing property stolen during the robbery. The man was sentenced to 15 years and eight months in prison and five years of supervised release. His accomplice was sentenced to five years of probation. • Postal Inspectors identified three suspects responsible for a series of armed robberies of letter carriers in Los Angeles between July and August 1997. The robbers are believed to be associated with the Centinela Park Family Blood street gang. At least six letter carrier robberies have been attributed to the gang. Inspectors arrested two gang members on December 20, 2002, who confessed to the robberies, and additional arrests are anticipated. The investigation is continuing. Graph Robberies: Five-Year Trend FY 98: 161 FY 99: 130 FY 00: 116 FY 01: 89 FY 02: Quote: FY 01: 3 facility robberies with physical injury and 41 without physical injury for a total of 44 facility robberies; 5 carrier robberies with physical injury and 20 without physical injury for a total of 25 carrier robberies; 1 other robbery with physical injury and 19 without physical injury for a total of 20 other robberies. In FY 01, the total robberies with physical injury was 9 and the total robberies without physical injury was 80 for a grand total of 89 robberies during FY01. FY 02: 3 facility robberies with physical injury and 41 without physical injury for a total of 44 facility robberies; 3 carrier robberies with physical injury and 22 without physical injury for a total of 25 carrier robberies; 0 other robbery with physical injury and 30 without physical injury for a total of 30 other robberies. In FY 02, the total robberies with physical injury was 6 and the total robberies without physical injury was 93 for a grand total of 99 robberies during FY01. Burglaries The Postal Inspection Service continues to see a significant decrease in the number of postal burglaries occurring over the past five years, although a few problems remain in rural areas of the country. About 81 percent of the burglaries in FY 2002 resulted in losses of less than $1,000, or the theft of fewer than 100 postal money orders. The graph below depicts postal burglary trends over the past five years. Following are examples of burglaries investigated by Postal Inspectors in FY 2002. • Postal Inspectors and members of the California Department of Forestry responded to a report that the Berry Creek Post Office had been burglarized and set afire. Mail and postal property were destroyed as a result of the vandalism. Damage to the facility was estimated at $150,000. Arson investigators determined that piles of mail had been placed throughout the building and ignited. The fire was contained to the building's interior. Postal Inspectors and local authorities identified four men responsible for the crimes. State charges were filed in April 2002, and the investigation is continuing. • A man was sentenced to 92 months in prison, to be served concurrently with a 10-year sentence on unrelated charges, after pleading guilty to the April 27, 2001, burglary of the Alvordton, Ohio, Post Office. A second convicted burglar was sentenced in March 2002 to 10 years in prison for his part in the crime. Postal Inspectors determined the men were part of a ring responsible for at least seven burglaries in Ohio and Michigan. • A man was convicted on June 12, 2002, for the February 2000 burglary of a New Jersey Post Office. During a routine traffic stop, state police found rifled mail and other items stolen from the New Gretna Post Office, as well as drug paraphernalia, in the vehicle the man was driving. A records check revealed that Postal Inspectors had an outstanding warrant for the suspect, and he was taken into custody. The man is scheduled to be sentenced soon on charges related to his burglary conviction. Graph Burglaries: Five-Year Trend FY 98: 367 FY 99: 291 FY 00: 294 FY 01: 286 FY 02: Mail Fraud Opening quote: "The Postal Inspection Service will bring a wealth of experience, expertise, and resources to our fight against corporate corruption." --Deputy Attorney General Larry Thompson, announcing the Attorney General's designation of the Chief Postal Inspector as a member of the Corporate Fraud Task Force The Mail Fraud Statute is the oldest and most effective of the consumer protection laws, and the Postal Inspection Service is the federal law enforcement agency mandated by Congress to enforce it. To increase their efficiency in investigating suspected mail fraud, Postal Inspectors lead and participate in several joint law enforcement and consumer group initiatives aimed at safeguarding the public's confidence in the U.S. Mail. Educating the public on fraud schemes that involve the mail is an essential component to meeting this goal. Postal Inspectors work cooperatively on joint task force investigations with other law enforcement agencies to take advantage of the expertise of each agency and to leverage resources. Of the approximately 1,900 Postal Inspectors across the nation, about 300 are assigned to mail fraud investigations. Inspectors investigated 3,355 fraud cases this past fiscal year, and Inspection Service analysts prepared more than 84,000 letters in response to mail fraud complaints. During FY 2002, Postal Inspectors arrested 1,634 mail fraud offenders, and 1,453 were convicted as a result of Inspection Service investigations conducted during this and prior fiscal years. In a significant case in July 2002, Postal Inspectors arrested five people in a securities fraud investigation of the nation's sixth largest cable company, which provided service to 5 million subscribers across the country. Inspectors arrested the 77-year-old founder of the company and his two sons in New York. Until their resignations in May, the three men held positions as president and CEO, executive vice president and chief financial officer, and executive vice president, respectively. Inspectors also arrested the company's former vice president of finance in Coudersport, Pennsylvania, and the director of internal reporting at his residence in Port Allegheny in that state. The defendants were charged with securities fraud, wire fraud, and bank fraud for failing to disclose billions of dollars worth of debt for which the company was liable. Directly following the July arrests, Deputy Attorney General Larry Thompson announced the Attorney General's designation of the Chief Postal Inspector as a member of the Corporate Fraud Task Force. Mr. Thompson stated, "The Postal Inspection Service will bring a wealth of experience, expertise, and resources to our fight against corporate corruption." Mail Fraud Against Businesses Postal Inspectors work diligently to protect the business community from being victimized by mail fraud. Examples of Postal Inspection Service case activity in FY 2002 follow. • After Postal Inspectors uncovered evidence that a California television station was the victim of embezzlement fraud, a news director at the station was convicted and sentenced to serve three years in prison, pay $2.4 million in victim restitution, and pay a $60,000 fine. The man submitted false billings under the guise of satellite and election poll expenses, using the money instead to cover personal expenses. • A Marengo, Illinois, woman was sentenced to two years in prison, three years' probation, a $7,500 fine and full restitution to her employer after submitting more than $2.5 million in fraudulent invoices for consulting services that were neither requested by nor performed for her company. Postal Inspectors learned the woman had used her position in the company to process the fraudulent invoices and had collected in excess of $1.7 million before the scheme was discovered. • In Alabama, one man was sentenced to life in prison and ordered to pay over $1.2 million in restitution and another was sentenced to three years and 10 months in prison for an insurance scheme involving people addicted to alcohol and drugs, or who had serious, pre-existing medical conditions, such as the AIDS virus. An Inspection Service investigation revealed that more than 100 life insurance policies the defendants handled were incomplete or inaccurate, although they paid the insurance premiums, controlled the policies, and acted as beneficiaries, collecting more than $1.6 million in proceeds. • An accountant in Dallas, Texas, was sentenced to one year and nine months in prison, three years' probation and more than $321,000 in restitution for an embezzlement scheme that began in 1997. Postal Inspectors found the accountant embezzled funds from his employer by writing and endorsing approximately 50 stolen checks. He mailed several of the bad checks to personal creditors. • A Minnesota man pled guilty to one count of mail fraud and one count of money laundering after embezzling more than $14 million from his employer. Inspectors found he used his position as chief financial officer to issue more than $11 million in cashier's checks to brokerage firms for credit into accounts he controlled, and used company checks to cover personal expenses and buy merchandise, which he resold. To conceal these activities, he altered financial records to reflect higher expenses, more inventory, and a lower gross profit. • Three Kentucky men were indicted after Postal Inspectors revealed their scheme to defraud investors and insurance companies of more than $13 million. They purchased, resold, or processed life insurance policies for people who were HIV positive or sick with AIDS, knowing the insureds had furnished false health information to get the policies. The men arranged for blood from a healthy person to be submitted to insurance companies instead of blood from sick applicants. • After an Inspection Service investigation, a doctor was sentenced to three years in prison, three years' probation, a $30,000 fine, and restitution of $72,145 to the Internal Revenue Service. Inspectors learned the doctor had scammed numerous insurance companies and the Texas Workers' Compensation Commission by mailing fraudulent billings. Most of his patients received gifts to induce them to return for more treatments. The doctor pled guilty to tax evasion related to $212,387 in unreported income derived from the scheme. Quote: John Rigas of cable television giant Adelphia Communications Corporation is led from New York's Main Post Office by a U.S. Postal Inspector on his way to federal court in July 2002. Rigas, his two sons, and two other Adelphia executives were charged with conspiracy, securities fraud, wire fraud, and bank fraud in connection with a scheme to defraud investors, creditors, and the public about the financial condition and operating performance of Adelphia. The scheme allegedly ran from 1999 through May 2002 and involved the failure of Rigas and others to disclose billions of dollars worth of debt for which Adelphia was liable. Mail Fraud Against Consumers The Postal Inspection Service emphasizes the importance of consumer awareness and prevention as the best protection for consumers, but many people still "take the bait." Examples of Postal Inspection Service case activity in FY 2002 follow. • A five-year Inspection Service investigation resulted in a sentence of eight years in prison, a fine of $7.3 million, and court-ordered restitution of $2.3 million for the head of a group of Massachusetts-based companies that defrauded novice inventors. People who mailed in ideas for new inventions were promised assessments by experts in the field. Instead, the companies accepted roughly 80 percent of the ideas, misleading people about the merits of their proposals and convincing them to pay advance fees of $4,000 to $12,000 for patenting and marketing services--which proved to be completely useless. About 34,000 people were defrauded of nearly $60 million. At sentencing, the judge praised Postal Inspectors for their dedicated work investigating and prosecuting this predatory scheme. • A man who ran several envelope-stuffing schemes from the Phoenix, Arizona, area was sentenced to five years' supervised probation, nine months' home detention, and more than $1 million in victim restitution. Inspectors found he placed ads in national publications offering envelope-stuffing opportunities to those who mailed in money to purchase supplies (the amount varied, from $18 to $36). People who mailed money to the anonymous, commercial mail receiving agency (CMRA) address only got a description of how to operate their own envelope-stuffing program, not the actual materials needed to do the job. • A Texas man pled guilty to mail and securities fraud after Inspectors proved he sold about $6.5 million in fraudulent certificates of deposit (CDs) to nearly 80 investors. The man never purchased the CDs, instead using the money he collected for personal and business expenses and to pay earlier investors, to keep the scheme going. Approximately $3.5 million is still owed to his 45 victims, many of whom are elderly citizens. • The owner and operator of a company that purported to invest money on behalf of personal injury victims who were recipients of lawsuit settlements was sentenced to 22 years in prison, five years' probation, a fine of $250,000 and restitution to victims of $66 million. Postal Inspectors found that most victims of the scheme had been seriously injured in accidents, or were widows and orphans of those killed in accidents. The company offered to set up trusts for victims and invest their settlements in U.S. government bonds to bring them a monthly income. Instead of buying the bonds, the owner used their money for personal expenses, unauthorized business transactions, high-risk investments, and real estate. • As a result of an investigation by Postal Inspectors, Sears--a major battery retailer that defrauded the public by selling defective Diehard car batteries--was ordered to pay $62.6 million in fines, $15 million of which will be paid to the Postal Inspection Service, and sentenced to serve five years' probation. Exide, which was also involved in the scheme, was ordered to pay $27.5 million in criminal fines, all of which will be credited to the Postal Service. Inspectors revealed that Sears misrepresented the batteries as being the "longest lasting" and containing certain proprietary features, although the batteries were defective. • An Inspection Service investigation of a multimillion-dollar investment scheme resulted in a sentence for a New Jersey man of one year and six months in prison, three years' probation, and more than $10 million in restitution. The man enticed people to invest in foreign bank guarantees (also called prime bank notes) by promising they would realize high rates of return with little or no risk. He then wired people's money to off-shore accounts he and co-conspirators controlled for their personal use. • Inspectors arrested two employees of a company that prints Business Week magazine who were charged with conspiracy to commit securities fraud after allegedly divulging confidential information about publicly held companies. The defendants are said to have collected--via the U.S. Mail--thousands of dollars in kickbacks for giving two co-defendants "insider" trading information they got from a column in Business Week. Postal Inspectors alleged that on 42 occasions the co-defendants bought company stock mentioned in the column on the day before the magazine's release to the public. The stock was sold the next day--after stock prices increased. The dollar value of the trades exceeded $2 million, and profits totaled approximately $450,000. • In the first of 24 sentencing hearings scheduled in New York for stockbrokers convicted of securities fraud and conspiracy to commit mail, wire, and securities fraud, eight stockbrokers received sentences of 18 to 41 months' imprisonment and restitution ranging from $89,000 to $1.8 million. The defendants, who were investigated by Postal Inspectors, are subject to full financial disclosures during probation. Quote: Victims snookered, criminals caught, and the world is safer thanks to Postal Inspectors. Washington--Northeast Division Postal Inspectors were honored at the U.S. Attorney's Office, Law Enforcement Awards, for their roles in uncovering a $60 million fraud scheme involving American Inventors Corporation (AIC) and American Institute for Research and Development (AIRD). AIC and AIRD allegedly assisted inventors in acquiring patents and marketing their ideas. But between 1980 and 1995, the companies snookered over 34,000 victims with deceptive advertising, misleading sales pitches, and false success stories. The two Inspectors were key to the investigation, interviewing more than 100 victims, employees, and others and reviewing more than a million documents seized by federal agents. Due to efforts, 17 suspects pled guilty. --USPS Newslink, The News Source for Postal Employees, May 10, 2002 Mail Fraud Against State, Local, and Federal Governments Government agencies and health care groups that fall prey to mail fraud scams are afforded the same protection under the Mail Fraud Statute as consumers and businesses. Examples of investigations in FY 2002 follow. • A task force investigation that included Postal Inspectors resulted in sentences of four years in prison, six months' home detention, and $2.5 million in fines for two principals of a family-owned construction company. As general contractors for the minority business enterprise (MBE) program of New York, the defendants conspired with subcontractors to act as "fronts" and fraudulently collect MBE credit on dozens of public works construction projects. Although the subcontractors did no construction work, they received kickbacks of five percent of the contract, resulting in $40 million in losses. • An administrative law judge with the Social Security Administration in Illinois was arrested by Postal Inspectors and charged with seven counts of mail fraud and four counts of unlawful disclosure of claimant files. Inspectors also arrested an attorney in the scheme, who was charged with seven counts of mail fraud and one count of making false statements. The judge allegedly directed claimants who lacked representation to retain the attorney as their counsel and then gave the attorney monthly docket sheets, allowing him to review Social Security files to strengthen claimants' cases. The judge was arrested on the day he was to celebrate his retirement from the bench. • A government contractor was sentenced to two years and six months in prison and her company was ordered to pay more than $421,000 in restitution after Postal Inspectors revealed she sold "O-rings" to the government that did not meet military specifications. As a result, 20 C-130 airplanes were grounded until their O-rings could be replaced, and more than $87,394 in damages occurred to a B1-Bomber when fuel leaked into the weapons bay through the O-rings. Losses to the Department of Defense exceeded $334,000. • A former California accountant was sentenced to three years in prison and ordered to pay more than $206,000 in restitution for a false-billing scheme, uncovered by Postal Inspectors, that defrauded California's Department of Transportation (CDOT) and two credit card companies. As an accountant for CDOT, the man submitted false invoices in the name of a defunct, hazardous waste materials clean-up company for a fictitious chemical spill. The agency mailed him a check to pay for the clean-up, and the man wired the money to Nigeria to finance the construction of a house he was building for his family. He also used information from identity theft victims to fraudulently obtain two credit cards, resulting in further victim losses. • A Baltimore, Maryland, man was sentenced to one year and six months in prison and three years' probation and was prohibited from running a tax-return preparation business during his supervised release. The man filed or helped to file 165 fraudulent federal and state income tax returns using fake Social Security numbers and unauthorized U.S. Congress letterhead. Postal Inspectors discovered the scheme in time and intercepted all refund checks in the mailstream before they reached his post office box. • A man in Monroe, Louisiana, was sentenced to four months with the Bureau of Prisons, four months' detention at a halfway house, and three years' probation. The judge also ordered him to pay $17,464 in restitution to the Internal Revenue Service after he pled guilty to two counts of filing false, fraudulent, or fictitious claims. Inspectors found he set up four post office boxes to receive tax refunds after filing fraudulent returns. The refunds were false because the people named on the returns did not authorize them to be filed, sign the returns, earn the income reported, or withhold taxes. He also named fictitious dependents and falsely claimed an earned income credit. The man got the names and Social Security numbers of dependents for the false returns from an elementary school where he had been employed as a custodian. Deceptive Mail The Postal Inspection Service created the Deceptive Mail Enforcement Team to identify violators of the Deceptive Mail Prevention and Enforcement Act and ensure swift, appropriate investigative attention in such cases. Team members examine questionable promotions and review consumer complaints for compliance with the act. During the past fiscal year, Postal Inspectors stopped 106 deceptive mailing operations, up 54 percent from last year. Postal Inspectors have been encouraged by the finding that many promoters have modified their practices to comply with the law by providing notifications and clearer explanations for customers. Further, the U.S. Postal Service has noted a sharp decline in the number of sweepstakes mailings, as companies adopt new marketing strategies in response to the law. Following are examples of actions taken against promoters of deceptive mailings in FY 2002. • A San Antonio man opened a post office box in the name of the "World Trade Center Charity" and advertised it was raffling a red, white, and blue PT Cruiser valued at $43,500. Inspectors interviewed the man and, after determining it was a bogus offer, obtained a Voluntary Discontinuance against the promotion and placed a "return mail" on the man's post office box to protect consumers. No money was collected. • At the request of a Postal Inspector, a federal judge issued a Civil Injunction and Consent Order to stop a fraudulent promoter from collecting donations for victims of September 11. The promoter claimed to be raising funds for the "purchase of 11,000 body bags." His scheme was halted before consumers lost any money. • As a result of an investigation by Postal Inspectors of the Washington Division, a Settlement Agreement was reached between the U.S. Postal Service and two Canadians operating businesses through the U.S. Mail. The agreement prohibited the men and any company associated with them from using the U.S. Mail for weight-loss products, diet products, diet patches, fat burning or dissolving products, nutritional supplements, or health food. They also agreed to pay a $25,000 fine. Inspectors found the Canadians did not solicit customers in their own country for the fraudulent products. Fraud on the Internet Cybercrime presents unique challenges to law enforcement groups. Traditional mail fraud schemes rebound with new success on the Internet, which expands the victim base and increases anonymity for the perpetrators. Postal Inspectors investigate Internet fraud when the U.S. Mail is used to further the scheme. • The founder and chief executive officer of a multi-level Internet marketing group in Boca Raton, Florida, was sentenced to 11 years and three months in prison, three years' probation, and more than $13.5 million in restitution. Customers were told they could buy "self-replicating" Web sites for $295, which would revolutionize Internet commerce by enabling them to become "cyber managers" and generate countless wealth while working from their homes. Inspectors determined there were no such sites. The officer used customers' money to pay for lavish personal items. • In Denver, Colorado, a woman was sentenced to two years in prison and three years' probation for defrauding people at eBay and Yahoo Internet auction sites. Postal Inspectors disclosed the woman and her daughter used fictitious and stolen identities when placing items for bid on the sites and took payments from the highest bidders without ever providing the goods. They used the same fake identities to fraudulently open bank and credit card accounts and apply for home mortgages. Victims lost about $15,000. • A South Carolina man was sentenced to 11 months in prison, three years' probation, and more than $21,000 in restitution for defrauding 25 eBay customers. He offered computers, cameras, digital recordings, and other electronics for sale at reduced prices. Customers submitted payments via the U.S. Mail to post office boxes he rented, but they never received the advertised goods. Graphic: Beware of Digital Thieves. Internet fraud schemes have cost consumers at least $4.3 million so far this year, up from $3.3 million in all of 2000, according to complaints received by the National Consumers League's fraud center. The true cost of these scams is probably much greater. Many victims do not report being ripped off. Average loss per Internet fraud victim was $427 for 2000 and $636 for 2002 according to the National Consumers League. The 2001 figure represents January through October statistics. The top Internet frauds for 2001 from the period January through October were online auctions - 63%, general merchandise sales - 11%, Nigerian money offers - 9%, Internet access service - 3%, and frauds on adult and game sites - 3%. The costliest scam: The average loss per victim of Nigerian money offers is $6,542. Victims of work-at-home schemes lost the least on average: $120 per person. Mail Order Fraud At the spring meeting of the Business Mailing Industry Task Force (BMITF) in Boston this past year, the Postal Inspection Service announced a new Web site to support communications between the business mailing industry and law enforcement groups dedicated to the prevention of mail order fraud. The Promotion Marketing Association will oversee Web site activities and work with the Inspection Service staff to implement regular updates. Password-protected links guide authorized users to information on mail fraud, prevention guidelines, and best industry practices, greatly facilitating communications between group members. Following are examples of mail order fraud investigated by Postal Inspectors during FY 2002. • A man was sentenced in Camden, New Jersey, to two years' probation, $40,000 in restitution, and an additional $20,000 in voluntary restitution for rebate fraud. An Inspection Service investigation revealed he mailed thousands of fraudulent rebate applications with fictitious or altered information to receive rebates for items he never purchased. The defendant mostly mailed in rebates for computer software worth $10 to $100 per item and used a computer to create the needed "qualifiers"--such as cash register receipts and universal product code (UPC) labels. To extend the scam and hide his identity, he used addresses of his family, friends, and others to receive the rebates. • Two individuals were indicted by a federal grand jury in Charleston, South Carolina, and charged with seven counts of mail fraud for scamming a well-known music company. The suspects ordered 7,000 compact discs worth $58,000 and failed to pay for them--they protected their identities by using post office boxes and CMRAs rented under fictitious names in 10 cities throughout the state. One of the defendants agreed to cooperate with Postal Inspectors, resulting in the indictments of a music store owner and another music store manager, who bought the discs for $3 to $5 each and sold them at a substantial profit. • Two Philadelphia men pled guilty to two counts of mail fraud and two counts of filing false income tax returns as the result of an investigation by Postal Inspectors. From 1993 through 1997, the men mailed more than 1.9 million unredeemed, manufacturers' cents-off coupons, valued at more than $1 million, to coupon redemption centers. The two failed to report income of more than $93,000, which they had collected in just one year from the scheme. Telemarketing Fraud Americans receive thousands of unsolicited phone calls from telemarketers each year trying to sell a variety of products, with older citizens often the target. Many offers are legitimate, but unscrupulous telemarketers can be the smoothest of operators, successfully swindling people out of millions of dollars. Indeed, those on fixed incomes who fall prey to these schemes can lose their entire life savings. Telemarketing fraud robs Americans of billions of dollars annually. During FY 2002, Postal Inspectors shut down 40 illegal telemarketing operations, a 43 percent increase over the previous year. Examples of cases follow. • Postal Inspectors disrupted a $9.3 million business-to-business telemarketing scam in Philadelphia, and the operators were charged with mail fraud and money laundering after thousands of U.S. businesses claimed to be defrauded. The operators allegedly charged companies exorbitant prices for lighting and maintenance supplies, in one instance billing a company $390 for trashcan liners worth $19.99, and in another case charging $945 for florescent lights worth $141. • The owner of an industrial supply company in Philadelphia was sentenced to two years in prison, three years' probation, and a $10,000 fine for a mail fraud and money laundering scheme. Postal Inspectors determined the owner had defrauded roughly 9,000 companies nationwide of more than $8.7 million using fraudulent statements, concealing material facts, and charging exorbitant prices for maintenance supplies. To induce companies to pay the inflated invoices, the promoter encouraged purchasing agents to accept gifts or kickbacks. • As a result of a joint investigation by Postal Inspectors from the Philadelphia Division and Toronto Area Royal Canadian Mounted Police, three Canadians were arrested for a cross-border telemarketing scheme targeting elderly U.S. citizens. Victims were told they had won a Cadillac and a cash prize, but had to mail a fee to cover taxes, licenses, and transportation expenses before they could claim it. Approximately 100 people lost more than $250,000. • A final settlement was announced in a lawsuit filed against operators of an alleged telemarketing scheme that operated in Portsmouth, Virginia. The settlement liquidated the corporation's assets and certain personal assets of the defendants and directed the money to be used as refunds, expected to total approximately $2.5 million, to victims of the alleged fraud. In addition to being permanently banned from offering telemarketing loans, the operators may not participate in any telemarketing activities or lending services for three years; after that time, they must post a $500,000 bond before engaging in such activities. Administrative Actions Related to Mail Fraud In addition to criminal prosecution, Postal Inspectors frequently rely on civil or administrative actions to deter mail fraud. Below is a list of actions taken this fiscal year to help stem losses from various fraud schemes. Graph: FY 2002 Administrative Actions: 76 Complaints filed by the Law Department, 35 Consent Agreements signed, 35 Cease & Desist Orders issued, 46 False Representation Orders issued, 151 Withholding Mail Orders issued, 1 Temporary Restraining Orders issued, 321 Voluntary Discontinuances signed and 1 Civil Injunction. Work-at-home scams target those who need money but are unable to work outside their residences. The scams usually promise big earnings and do not require prior job experience. Postal Inspectors take pride in putting the scammers out of business. The Postal Inspection Service conducted 60 such investigations during FY 2002 and reported 10 arrests, four Cease and Desist Orders, three Withholding Mail Orders, and 14 Voluntary Discontinuance Agreements. A Withholding Mail Order (Title 39, USC 3003) enables the Postal Service to withhold an addressee's mail if they are using a false or assumed name, title or address to conduct or assist with activity that violates 18 USC 1302 (lottery), 1341 (mail fraud) or 1342 (use of a fictitious name or address), until proper identification is provided and the person's right to receive the mail is established. Under 39 USC 3004, the Postal Service may withhold mail if the address is not a person's residence or business address, allowing them to remain anonymous. Examples of Postal Inspection Service case activity related to administrative actions in FY 2002 follow. • A False Representation Order was issued against the promoter of a weight-loss scam based on his breach of a previous order to cease and desist. A settlement agreement was then reached between the promoter and the Postal Service permanently prohibiting him from using the mail for such activities in the United States; the promoter also agreed to pay the Postal Service a $100,000 penalty. Using several names, the promoter solicited customers through the mail to buy diet and weight-loss products and mail their payments to addresses across the country. • A Withholding Mail Order was served on a Swiss company that rented mailboxes worldwide under various psychics' names. Postal Inspectors learned the promoter solicited senior citizens almost exclusively, leading them to believe a psychic would perform a spiritual reading based on information they provided. All respondents, it turned out, received virtually the same reading. Victims paid between $14 and $99 and were encouraged to also purchase amulets of colored glass or carbon that would "protect" them. Company principals hired a San Francisco attorney to represent their interests, and the attorney agreed to have his clients sign a Cease and Desist Order and stop soliciting U.S. citizens. • The Postal Service's judicial officer issued a Withholding Mail Order for mail addressed to a company operating from several addresses in the Northwest. The company used addresses at commercial mail receiving agencies (CMRAs) to anonymously conduct a lottery and sweepstakes scam in which respondents could spend from $9.95 to $29.95 for chances to win $300,000 to $2.5 million in prizes. All mail received at the addresses was reshipped to Vancouver, British Columbia. • The Postal Service's judicial officer issued 70 Withholding Mail Orders for U.S. addresses, 65 of which were CMRAs, used by a criminal enterprise with an elaborate network that used more than 100 false IDs and addresses in the United States and Canada to insulate it from detection. Inspectors alleged the ring committed tax fraud, insurance fraud, and credit card fraud that claimed thousands of victims, but expect the withholding orders will prevent further losses. All withheld mail is returned to senders. • A Consent Agreement and a Cease and Desist Order were issued by the U.S. Postal Service's judicial officer against a man who rented addresses at CMRAs under various names in Tampa, Florida. Postal Inspectors found he sent direct mail solicitations with misrepresentations about programs people could buy for $29.99 to $49.99 that would earn them large sums of money in a short time with little or no effort. After people bought the material, he added new requirements for "bonus payments." The Cease and Desist Order prohibits false representations, requires that refunds be provided to requestors, and states that those who respond to the solicitation receive the money as advertised. Fraudulent Foreign Lottery Mail To date, 39 False Representation Orders (FROs) have been issued against foreign lottery promoters. FROs enable Postal Inspectors to stop victims' mail (most of which contain checks) from leaving the United States and return mail to senders, thereby preventing losses. To further combat illegal foreign lotteries, Postal Inspectors work with U.S. Customs Service officials to stop such offerings from entering the U.S. mailstream, and Customs agents contact Inspectors when they find such mail during border searches. Inspectors detain the mail and provide samples to the Postal Service's Law Department to determine if they meet mailing standards. If the pieces are considered nonmailable, the mailer is notified that the material is subject to destruction and may appeal the notice. If the mailer fails to appeal or loses the appeal, the detained mail is destroyed upon the issuance of a Destruction Order. During this reporting period, roughly 849,000 pieces of foreign lottery mail were destroyed prior to entering the mailstream. Since the initiative began in 1994, approximately 14.6 million pieces have been destroyed. Child Exploitation Opening quote: Since the passage of the Child Protection Act of 1984, Postal Inspectors have conducted 4,474 child exploitation investigations, resulting in the arrests of 3,711 individuals who used the mail in violation of federal child exploitation laws. Child pornography and the sexual exploitation of children are tragic, heart-rending crimes that plague law enforcement agencies worldwide. Child pornographers who assume (incorrectly) the U.S. Mail will provide a safe, reliable, and anonymous vehicle for exchanging such material are aggressively targeted by U.S. Postal Inspectors, regarded internationally as leaders in the fight against child exploitation. In keeping with this reputation, the Chief Postal Inspector was offered and accepted a seat on the National Center for Missing and Exploited Children's (NCMEC's) Board of Directors in FY 2002. The Postal Inspection Service has developed strong, cooperative relations with the NCMEC over the years, and it is expected that representation on its board will foster an even more effective partnership through mutual, coordinated efforts to protect children from sexual abuse and exploitation. NCMEC Cyber Tipline reports are reviewed at Inspection Service National Headquarters and forwarded to field Inspectors who are child exploitation specialists for investigation or referral, as appropriate, and an Inspector is assigned full-time to the NCMEC. The Postal Inspection Service is an active member of the Attorney General's Federal Agency Task Force on Missing and Exploited Children and participates on the Attorney General's Advisory Committee Working Group on Child Exploitation. A Postal Inspector is assigned full-time to the FBI's Innocent Images Task Force, a national initiative based in Calverton, Maryland, and Inspectors work closely with federally funded Internet Crimes Against Children Task Forces strategically located across the country. The exchange of child pornography by mail is often accompanied by communication over the Internet. Child molesters and pornographers often use the Internet to seek potential victims, communicate with like-minded individuals and locate sources of child pornography. Over the past several years, there has been an increase in unlawful computer transmissions and Internet ads for child pornography, which occur hand-in-hand with the trafficking of child pornography videotapes and computer disks through the mail. In FY 2002, 60 percent of child exploitation cases investigated by Postal Inspectors involved computers, as well as postal violations. Since the passage of the Child Protection Act of 1984, Postal Inspectors have conducted 4,474 such investigations, resulting in the arrests of 3,711 individuals who used the mail in violation of federal child exploitation laws. In addition to a tie-in with Internet transactions, Postal Inspectors have long seen a correlation between child molesters and those who sell, purchase, and trade child pornography. In 1997, Postal Inspectors first began compiling statistics in these areas: • Postal Inspectors have stopped 476 child molesters (roughly 36 percent of 1,327 arrests). • Inspectors rescued 530 child victims from further abuse. • Approximately 52 percent of all digital evidence examinations performed by forensic specialists from the Inspection Service's Forensic and Technical Services Division involve child exploitation investigations, and that number is expected to increase. In FY 2002, Postal Inspectors arrested 249 individuals for child sexual exploitation offenses and reported 256 convictions in such cases from this and prior fiscal years. Incident to a search of a suspect's property, Postal Inspectors often find evidence that the target of the investigation is also a child molester. As a result of Inspectors' casework this past fiscal year, 93 child molesters were identified and 96 child victims saved from further abuse. Examples of such cases investigated by Postal Inspectors in FY 2002 follow. • Postal Inspectors arrested a 35-year-old man, who was an intensive-care nurse at several hospitals in the Chicago area, after he unlawfully received two videotapes of child pornography by mail. The defendant pled guilty and admitted that, between 1995 and 2000, he sexually assaulted as many as 18 young girls and women under his care. One victim was only nine years old, and other victims were attacked when in comas, unconscious, or so heavily sedated they were unable to defend themselves. The former nurse was sentenced in October 2001 to six years and six months in prison and three years' probation. • The mayor of Ashland, Kentucky, and a local businessman were indicted in June 2002 as co-conspirators in receiving child pornography by mail and possessing child pornography. Inspectors identified the men during an undercover investigation, resulting in the mayor's resignation from office on May 31, 2002, three days after Inspectors searched his home. • Postal Inspectors working with local law enforcement officers arrested the head custodian of the Rockwood Elementary School in Oklahoma City on May 20, 2002, after he received child pornography through the mail and attempted to hide it in the school's boiler room. After news of the arrest spread, several female students came forward and reported inappropriate touching by the custodian. Inspectors served search warrants at the man's home and a private storage facility and seized hundreds of videotapes, student photographs, and swatches of girls' hair stored in labeled envelopes. The investigation expanded considerably after a number of elementary school students were identified on the videotapes. The custodian is being held in federal custody without bond. • Postal Inspectors identified a man from Whitfield County, Georgia, as part of a child pornography ring known as the "Spanking Club," a loose-knit group of individuals in the United States and Canada who derived sexual pleasure from the severe spankings of children. He was convicted of producing and mailing videotapes depicting the sexual abuse of his own children. Videos trafficked by the club's members depicted extreme child abuse and cruelty. The suspect was sentenced on November 26, 2001, to 10 years in prison. • Another member of the Spanking Club, from Vanceburg, Kentucky, was sentenced in March 2002 to 20 years in federal prison with no possibility of parole for producing and mailing videotapes depicting the brutal and sadistic sexual abuse of his own children. Postal Inspectors and FBI agents have arrested other members of the group in Alabama, Florida, Illinois, New York, and Wisconsin. • Acting on a tip from the National Center for Missing and Exploited Children, Postal Inspectors and local law enforcement officers arrested an Elizabeth, New Jersey, man in April 2002 for sexually assaulting children, producing child pornography, and distributing child pornography by mail to the Netherlands. Investigators found photographs on his computer depicting child sexual abuse for distribution on the Internet. Four victims ranging from eight to 13 years of age were rescued from further sexual abuse and exploitation. • A man in Davenport, Iowa, who regularly babysat neighborhood children, pled guilty in May 2002 to producing child pornography. Postal Inspectors searched his home after receiving a tip that he had received child pornography by mail from foreign sources. Inspectors found videotapes of the man sexually abusing four young boys, one of whom was only six years old. • A man in Cheektowaga, New York, was sentenced in July 2002 to 15 years and nine months in federal prison for producing, possessing, and mailing child pornography. An investigation by Postal Inspectors and FBI agents revealed the man had sexually abused his nine-year-old grandson and had been doing so since the boy was three years of age. Further, he videotaped the abuse and mailed the videotapes to others; Inspectors found more than 100,000 child pornography images on his computer. The offender was previously arrested in 1987 on state charges for raping his 16-year-old daughter and sodomizing his 14-year-old son, but was sentenced to only two years of probation for those crimes. • A Roman Catholic priest in Baltimore, Maryland, pled guilty on July 16, 2002, to receiving child pornography after his arrest by Postal Inspectors, FBI agents, and Baltimore City detectives. Inspectors joined the investigation at the request of Baltimore police after they learned the priest was purchasing items of a questionable nature through eBay. They found the priest had spent in excess of $6,000 on more than 110 items in a two-month period, which he received at the church rectory and his parents' home. The majority of purchases were photographs and videotapes involving young boys. • In September 2002, Inspectors arrested an Ecuadorian man who was a regular visitor to the United States and charged him with distributing child pornography by mail. He was indicted later that month on charges of conspiracy to produce and ship child pornography and for possessing child pornography. Inspectors alleged he used a commercial mail receiving agency to sell child pornography, much of which he produced himself in South America and smuggled into the United States. Quote: "The U.S. Postal Inspection Service provides an important role in tracking sexual predators, because child pornographers often use the mail to purchase obscene materials off the Internet. In Operation Avalanche, Postal Inspectors created an undercover Web site which they used to bring down what is believed to be the largest commercial child pornography enterprise ever encountered by law enforcement authorities in the United States. They started in Texas; it ended in Texas--because of the hard work of the Postal Inspectors, the good work of prosecutors, and the sentencing of one tough federal judge." --President George W. Bush, from his speech "Remarks by the President on Children's Online Safety" Quote: The U.S. Postal Inspection Service was presented with the National Exploited Children's Award for Operation Avalanche, a two-year investigation that successfully brought down a husband-and-wife team who operated a multimillion-dollar company offering Web sites for child pornography. The principal operator received an unprecedented lifetime sentence in federal prison, and more than 120 others related to the enterprise were arrested across the country. A Postal Inspector from the Tampa Field Office of the Florida Division also received a National Missing Children's Award for her safe recovery of Lindsay Shamrock, a teenaged girl who was lured via the Internet and the U.S. Mail from her home in Mulberry, Florida, to Greece by a German national, who was arrested and charged with cild abduction and exploitation of a minor. Illegal Drugs and Trafficking Opening quote: Postal Inspectors report that the Internet is used in conjunction with the U.S. Mail in approximately 15 percent of its narcotics investigations. In Operation Liquid Mail, Inspectors arrested 120 customers who ordered and received illegal drugs via the Internet and U.S. Mail at 84 locations across the country. The Postal Inspection Service interdicts mailings of illegal drugs and drug proceeds to protect postal employees from the violence often related to drug trafficking and to preserve the integrity of the U.S. Mail. Working in concert with other law enforcement agencies, Postal Inspectors arrested 1,385 individuals this fiscal year for drug trafficking and money laundering via the U.S. Mail. Seizures from the mail included roughly 4,888 pounds of illegal narcotics and approximately 770,644 units of steroids. Postal Inspection Service investigations also resulted in the seizure of about $1.6 million in cash and monetary instruments, five vehicles, and 66 firearms. Postal Inspectors from New York and agents from the Drug Enforcement Agency and other state, local, and federal law enforcement agencies initiated Operation Liquid Mail, an investigation that began in January 2002 of the activities of a Canadian man who was trafficking large quantities of GBL (gamma-butryrolactone) via the U.S. Mail and the Internet. GBL is used to manufacture GHB (gamma hydroxtbuyric acid), a central nervous system depressant banned by the Food and Drug Administration in 1990 and commonly referred to as the "date rape" drug; it can result in unconsciousness, seizures, severe respiratory depression, or coma. The man set up Web sites to process orders for the drug, which he mailed to customers around the world, collecting several millions of dollars in revenue. Investigators arrested him in Quebec on September 18, 2002, at which time they seized from him banking records and two computers. A search of a related warehouse resulted in the recovery of 605 gallons of GBL, 55 gallons of 1,4 butanediol, 350 cases of 1,3 butanediol, and 600 pounds of potassium hydrochloride. Postal Inspectors also identified and arrested 120 of the man's business customers at 84 locations across the country. The following paragraphs are examples of other Postal Inspection Service investigations of illegal drug trafficking via the mail in FY 2002. • Postal Inspectors and San Diego Narcotics Task Force agents arrested a man on May 16, 2002, for distributing anabolic steroids, ketamine, and other controlled substances via the U.S. Mail. The suspect advertised products and received orders via the Internet and then distributed the products by Express Mail or Priority Mail. He allegedly distributed approximately $5,000 worth of controlled substances per day to more than 300 customers across the country. • On May 22, 2002, Postal Inspectors and agents from the Marietta-Cobb-Smyrna (MCS) Narcotics Unit and U.S. Customs arrested a man for selling illegal steroids over the Internet and distributing them via the U.S. Mail. The defendant rented several addresses at a commercial mail receiving agency (CMRA) in Marietta, Georgia, allegedly in order to traffic illegal narcotics to other addresses, including a CMRA in San Diego. The Postal Inspection Service's Computer Forensics staff analyzed evidence seized under warrant from the suspect's residence and alleged that each of his customers generally placed orders exceeding $2,000 for the steroids. • On October 3, 2001, two men were sentenced for their roles in distributing eight pounds of crack cocaine and nine pounds of heroin from Vallejo, California, to Rock Island, Illinois, via Express Mail. The men were sentenced to 27 years and 22 years, respectively, in federal prison. They hid the narcotics in vacuum-sealed cans of tuna fish before mailing them. During the execution of a search warrant by Postal Inspectors and Rock Island narcotics officers, one of the men tried to elude capture by jumping out of a second-story apartment window. He broke both his legs in the fall, and was admitted to a secured unit in a local hospital. After receiving medical attention, the man escaped from the secured unit and remained a fugitive for over two years before being located and arrested in Omaha, Nebraska. • In December 2001, a Des Moines, Iowa, man was sentenced to 25 years in federal prison for orchestrating a scheme to distribute methamphetamine and narcotics proceeds through the U.S. Mail. An investigation by Postal Inspectors led to the disruption of a ring of six suspects who conspired to distribute approximately 30 pounds of methamphetamine throughout the Midwest. Four others in the ring received federal sentences ranging from four to 17 years in prison. A sixth member of the ring remains an international fugitive. • Postal Inspectors in St. Louis, Missouri, concluded a two-year investigation in February 2002 of four men responsible for distributing more than 40 pounds of cocaine and narcotics proceeds via the U.S. Mail and other private couriers. During the course of the investigation, Inspectors seized $111,000 in cash, five weapons, bulletproof vests, and fake police insignia used by the group. The men relied on a local business to conceal their transactions. They were sentenced to federal terms ranging from four to 10 years in prison. • A three-year investigation of a major, multistate drug distribution ring investigated by the U.S. Postal Inspection Service and the Jackson County, Missouri, Drug Task Force concluded in FY 2002. The ringleader orchestrated the distribution of 100 pounds of methamphetamine and other narcotics in the Kansas City area. Ring members transported the drugs from Los Angeles via Express Mail and Federal Express to addresses in Missouri and Kansas. Twenty suspects were indicted as a result of the investigation, and all pled guilty in federal court, receiving sentences ranging from five to 17 years in prison. • On May 16, 2002, four Illinois men were indicted on charges of conspiracy to deliver controlled substances. The four were arrested one month earlier when they attempted to sell approximately 86 grams of methamphetamine to an undercover Postal Inspector assigned to the High Intensity Drug Trafficking Area (HIDTA) Designer Drug Task Force. In conjunction with three other arrests in October 2001 and another in December 2001, this latest group of arrests marked the end of a Filipino ring that had been distributing crystal methamphetamine in Chicago. The ring used various methods, including U.S. Mail, private couriers, and body carriers to distribute and transport the illegal drugs. The methamphetamine was produced in the Philippines and Mexico and then smuggled into the United States. Distributors in Las Vegas and California brought the drugs to the Chicago area for distribution and sale. Quote: Postal Inspectors in Philadelphia and Los Angeles initiated an investigation in June 2002 of two Philadelphia brothers who were distributing methamphetamine via Express Mail between the two cities. Inspectors discovered the men were secreting methamphetamine inside caulking tubes and transporting the tubes to Philadelphia via Express Mail. As with many drug networks, dealers used the U.S. Mail along with other transportation methods to distribute narcotics and narcotics proceeds. After taking the brothers into custody, Inspectors identified their conspirators who drove the methamphetamine from Winston-Salem, North Carolina, to Philadelphia. Inspectors additionally arrested another two conspirators and seized 26 pounds of methamphetamine secreted in two tires in the back of their vehicle; more of the illegal drug was found hidden in the motor housing of the windshield wipers. Employee Drug Investigations Postal Inspectors investigate the selling of narcotics by postal employees while on postal property or on duty. Information on the possession or personal use of illegal drugs by postal employees is referred through postal management to the Employee Assistance Program for attention. In FY 2002, Postal Inspectors arrested 34 postal employees suspected of possessing or using illegal drugs on duty, and 24 employees were removed from the Postal Service. Following are examples of Postal Inspection Service investigations of narcotics-related offenses by postal employees during FY 2002. • Postal Service managers requested Inspectors' assistance in addressing suspected illegal narcotics activity by employees at the Englewood Station in Chicago, Illinois. A subsequent investigation resulted in the arrests of three postal employees and an accomplice. A letter carrier was placed on emergency suspension from postal duties following his arrest on May 16 for distributing a controlled substance. Two mail handlers were also arrested and suspended, and the outside accomplice was arrested. • Following a two-year investigation by Postal Inspectors, a former postal supervisor, who was an "acting" postmaster in Massachusetts, was sentenced in January 2002 to eight years and one month in prison and four years' supervised release. Inspectors determined that, between 1990 and 1998, the former employee opened post office boxes for the purpose of receiving marijuana through the mail. Each package weighed between 20 and 30 pounds. Quote: Postal Inspectors use surveillance cameras to identify customers suspected of mailing prohibited items, including illegal drugs, via Express Mail. Asset Forfeiture and Money Laundering Opening quote: Forfeiture activity by Inspectors this fiscal year netted $6.7 million. The Postal Inspection Service also equitably shared $11.4 million with other federal, state, and local law enforcement agencies. Asset Forfeiture The Postal Inspection Service uses asset forfeiture laws to combat financial crimes, as well as drug trafficking and child exploitation conducted through the mail. In FY 2002, the USA Patriot Act expanded the government's money laundering and asset forfeiture authority. President Bush signed the act, formally titled "Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot) Act" on October 26, 2001. Also referred to as "the Anti-Terrorism Act," it made sweeping changes to the criminal laws related to wiretapping and electronic surveillance and contained a number of provisions related to money laundering and asset forfeiture that are useful to prosecutors in terrorism cases and in a broad range of other areas. Key forfeiture provisions include these portions of the act: • 18 USC 981 was amended to authorize civil and criminal forfeiture of all assets, foreign or domestic, of any individual or organization engaged in terrorism or terrorist activity. • The act of smuggling currency into or out of the United States was made a criminal offense, and all property involved in such an offense is subject to civil and criminal forfeiture. • 18 USC 1960 was expanded to cover licensed businesses that transmit funds when the defendant knows they were intended to be used for an unlawful purpose; civil forfeiture for Section 1960 offenses was also authorized. • Additional foreign crimes, including public corruption, were added to the definition of "specified unlawful activity" for money laundering offenses,; and civil and criminal forfeiture of both the proceeds from and the property used to facilitate such offenses was authorized. • The government is now authorized to seize and forfeit money in U.S. correspondent accounts of foreign banks if the funds forfeitable under U.S. law were deposited into an account in the foreign bank overseas. • The U.S. Attorney General was authorized to serve administrative subpoenas on foreign bank accounts for records related to foreign transactions. The act also contained expanded money laundering and forfeiture authority in a number of minor areas. The bill authorizes civil and criminal forfeiture for conspiracies to commit Title 31 currency reporting offenses, and possibly for failure to file a Form 8300 report; expands the government's civil enforcement authority under 18 USC 1956(b); authorizes courts in criminal forfeiture cases to order a defendant to repatriate assets to the United States; expands the fugitive disentitlement doctrine, 28 USC 2466, to apply to corporate claimants; and expands the courts' authority under 28 USC to enforce foreign forfeiture judgments, including foreign restraining orders. Postal Inspectors seized 661 assets and secured 428 forfeitures in FY 2002. Forfeiture activity by Inspectors this fiscal year netted $6.7 million. The Postal Inspection Service also equitably shared $11.4 million with other federal, state, and local law enforcement agencies. Following are examples of Postal Inspection Service asset forfeiture cases from FY 2002. Beginning in 1989, San Diego Postal Inspectors investigated a cross-border mail order business run by a couple over a 15-year period. The man had been the subject of Postal Service administrative actions and Inspection Service criminal investigations since the early 1980s. Inspectors determined that, from the late 1980s until 1998, the couple sold such products as Live Cell Therapy (a "life extension" and "cure" for numerous diseases, including brain disorders), Energy Complex (a "cure" for impotence), and Neutralizer GH (a "cure" for obesity). Promotional literature claimed the products were "banned in the U.S." and "sold only in Mexico," but Inspectors determined they were actually multipurpose vitamins purchased in Southern California. The couple also failed to honor their "100 percent money-back guarantee" for dissatisfied customers. People lost more than $6 million to the pair, who used victims' money to purchase personal luxuries, including two homes in California--one in Newport Beach valued at more than $2 million, and another in Palm Desert worth $565,000. After signing a plea agreement in October 2001, the man was sentenced on May 23, 2001, to 33 months in prison and three years' probation and was ordered to forfeit to the United States either $1.5 million or his two homes and a 1998 Maxum yacht; he was also ordered to pay to his victims half of the $69,781 he scammed from them (the other half will be paid by his wife), a criminal fine of $7,500, and any unpaid taxes to the Internal Revenue Service. He failed to produce the $1.5 million, however and, in November 2001, the United States filed quit-claim deeds and complaints for forfeiture and declaratory relief on the properties. On December 13, 2001, Postal Inspectors seized the yacht under federal warrant. Quote: A task force of Postal Inspectors from the Mid-Atlantic Division investigated a North Carolina Department of Transportation employee who used his position to influence state projects, resulting in substantial property value increases to property he owned. A forfeiture check in the amount of $330,000 was presented to the Postal Inspection Service, representing its equitable share of the $1 million forfeiture. Money Laundering Because the Postal Service is considered a non-bank financial institution and a money services business, it must comply with the reporting requirements of the Bank Secrecy Act (BSA). The Postal Inspection Service supports the Postal Service's BSA compliance efforts by analyzing postal money order transactions and investigating criminals who use them and other postal financial products to launder illicit proceeds and avoid federal reporting requirements. Beginning in 2002, the Postal Inspection Service joined Operation Green Quest, a multi-agency task force headed by U.S. Customs that identifies and disrupts terrorist funding sources. Illicit proceeds may include money gained through narcotic sales, the smuggling of illegal aliens, tax evasion or the selling of counterfeit merchandise. Following are examples of money laundering cases investigated by Postal Inspectors during the past fiscal year. • Postal Inspectors from the Rocky Mountain Division and agents from the Arizona Joint Terrorism Task Force arrested an Iranian national on October 5, 2001, for conducting an illegal money transmitting business and violating the International Emergency Economic Powers Act and money laundering laws. While the indictment and arrest of the defendant are not the direct result of the terrorist attacks of September 11, 2001, information developed during the investigation is being analyzed to identify possible links between the man and those responsible for the attacks. The indictment alleges the defendant owned, operated, and controlled several businesses involved in illegal financial activities. From January 1997 through October 2001, he allegedly transferred more than $19 million to the Islamic Republic of Iran. • A multi-agency task force that included Postal Inspectors from the North Jersey/Caribbean Division arrested four men in November 2001 on charges of money laundering, and one of the group was also charged with mail fraud. Investigators alleged the men laundered more than $2.9 million in fraudulently obtained Medicaid and Medicare proceeds through shell companies, third-party entities, bank accounts, and investment accounts. At least 96 structured purchases of Postal Service money orders and bank money orders were allegedly deposited into one man's investment account. Illegal proceeds were said to be obtained through the operation of a pharmacy in Newark, New Jersey, owned by two of the defendants. They are alleged to have submitted more than $2.5 million in false and fraudulent claims to Medicaid and Medicare for prescription medications that were neither purchased nor dispensed and used two pharmacies to submit another $480,000 in fraudulent Medicare claims. Investigators noted that several of the Medicaid recipients were deceased at the time they allegedly made purchases at the pharmacies. • Two Russian nationals pled guilty on May 30, 2002, after they were arrested by Postal Inspectors from the Northeast Division in February 2002 on money laundering charges. Inspectors found numerous stolen items, including unnegotiated Postal Service money orders. An analysis of the money orders disclosed a clear pattern of structured purchases made at 27 post offices across the United States. The aggregate value of the money orders is $77,700. • Postal Inspectors from the Northeast Division also participated in an investigation of a suspect in Fort Ann, New York. The man bought more than $50,150 in postal money orders in structured purchases, deposited them into his industrial-waste business account, and used the funds to purchase a condominium in Ft. Pierce, Florida. The suspect had previously been arrested on drug trafficking charges and, while out on bail, liquidated many of his assets and fled the country. He was living in Israel when he alerted American authorities of his desire to return to the United States and cooperate. He appeared in court and pled guilty on April 24, 2002, to a two-count information charging him with narcotics and money laundering violations. • Postal Inspectors arrested a New York man on July 3, 2002, for purchasing 267 postal money orders--worth $185,284.46--from 18 postal facilities to avoid federal reporting requirements. The investigation revealed the defendant deposited the money orders into seven bank accounts he held in Long Island, New York; Dallas, Texas; and Honolulu, Hawaii. During the same period, he made 30 cash deposits totaling $167,064. Quote: In a case investigated by Postal Inspectors in the past fiscal year, a company sought investments from people who won large settlements in personal injury suits. The company's owner used investors' money to fund a grocery store venture (which failed) and to purchase luxury items for his own use. He pled guilty to conspiracy charges just before his wife pled guilty to related charges. The husband was ordered to pay $66 million in restitution to victims, but lawyers familiar with the case said it is unlikely anywhere near that amount of money will be available. The couple fled to Belize, Central America, to avoid prosecution and to protect their assets. Midwest Division Inspectors and the Postal Inspection Service's Office of Counsel worked with the U.S. Attorney's Office of the Southern District of Illinois to apply the USA Patriot Act in the seizure of more than $1.6 million of the couple's funds from Hibernia Bank (funds of the Provident Bank and Trust of Belize), a U.S. correspondent bank. The funds had originally been deposited to a bank in Belize. The couple's 67-foot, 1979 Berger yacht was seized by U.S. Marshals on January 8, 2002, and transported to Ft. Lauderdale, Florida, where it was sold through an interlocutory sale that allows for the disposal of seized property that is either expensive to maintain or highly perishable. Revenue and Asset Protection Opening quote: Postal Inspectors determine which products and sources of revenue pose the highest financial risk to the Postal Service and target their investigations accordingly. Revenue Investigations Postal Inspectors determine which products and sources of revenue pose the highest financial risk to the Postal Service and target their investigations accordingly. For the past several years, postage fraud schemes involving large-scale business mailers have been a priority, especially mailers that use metered postage and those that claim presorted discount rates of postage. Postal Inspectors measure the effectiveness of their revenue investigations by the number of postage fraud schemes they identify and successfully resolve. In addition to stopping the scheme, the "resolution" may involve sending the perpetrator to jail, recouping lost funds if possible and, as appropriate, collecting fines and penalties from the perpetrators. The chart at right summarizes Postal Inspection Service revenue investigations this past fiscal year. In FY 2002, Postal Inspectors concluded more than eight major investigations involving the underpayment of postage by large-scale, commercial mailers. Postage fraud schemes are generally complex because of the many postal operations and postage rate structures that must be understood, and can pose a problem for prosecutors trying to present the case to a jury. In this respect, the past fiscal year has been noteworthy. In a significant case that concluded in July 2002, a four-year investigation by Postal Inspectors of the largest mail preparation company in the New York area resulted in sentences for three owners and four managers of American Presort, Inc. (API) following their convictions in 2001 for racketeering and mail fraud. One of the owners, who pled guilty shortly after the trial commenced in 2001, was sentenced to 42 months in prison after he signed a forfeiture agreement for $5 million. A second owner was sentenced to 51 months in prison and also signed a forfeiture agreement for $5 million, and a third owner was sentenced to 60 months in prison. He refused to sign a forfeiture agreement and is liable for the entire judgment of $20.7 million. Four managers involved in the scheme received prison sentences ranging from 30 to 37 months, and each was ordered to pay restitution of $17 million. Five cooperating witnesses were sentenced to probation and community service. An in-depth story of this investigation is featured in the special insert at right. Further examples of revenue investigations conducted by Postal Inspectors in FY 2002 follow. • A civil complaint was filed against the owner of a presort company in Dallas, Texas, as a result of a previous Postal Inspection Service criminal investigation. The company's operations manager was convicted in 2001 of defrauding the U.S. Postal Service of more than $6 million in postage during a period of 19 months. The civil complaint filed in 2002 alleged the company contributed to the postage fraud when the owner knowingly hired a felon to oversee his mailing operation. Further proceedings are pending. • The publisher of a national magazine was convicted in federal court for falsifying information to the Postal Service to get reduced mailing rates and attract advertisers. The conviction is significant, in that frauds of this nature are difficult to uncover, and it is often equally difficult to prove intent; it is also only the second criminal conviction of a Periodicals publisher in the past 10 years. Postal Inspectors learned of the violation by accessing the Web site of an independent audit firm responsible for reviewing the activities of similar publications. • After Postal Inspectors arrested the supervisor of a Washington-area letter shop, she was convicted of defrauding one of its mailing customers, the Democratic National Committee (DNC). The letter shop contracted with the DNC to mail almost 550,000 solicitations during the 2000 presidential campaign. A Postal Inspection Service investigation revealed the letter shop only prepared and mailed about four percent of what it had been paid to do. • A Postal Inspector's arrest of a suspect outside a Palm Springs, California, Post Office in January broke open an investigation of an organized ring that had negotiated or attempted to negotiate $220,000 worth of counterfeit checks throughout Southern California. The ring's success stemmed from its use of "borrowed" names and addresses of legitimate businesses to lull postal clerks into accepting high-dollar business checks for stamp purchases. A legitimate courier service was often used in the ruse, further insulating the suspects from detection. Area post office losses attributed to the ring total $143,000; the same ring is suspected of orchestrating another $200,000 in losses in that area from another scheme. The ring operated successfully for months and evaded capture until January 2002, when a Palm Springs postal clerk became suspicious and alerted Postal Inspectors from the Southern California Division. Inspectors traced the courier to one of the ring's fringe members. Cooperation from the suspect has already led to the identification of a key member of the ring. The investigation is continuing. • The U.S. Attorney's Office in the Northern District of California finalized a False Claims Action in June against a prominent presort bureau, the PSI Group. Pursuant to the agreement, PSI will pay almost $1 million after claiming it had sorted its mail to the greatest extent possible and was entitled to postage refunds from the Postal Service under the Value-Added Refund program. An investigation by Inspectors revealed the mailer had not, in fact, completed all of the work-sharing it claimed, and the Postal Service would have to perform additional, unanticipated processing before the mail could be properly transported and delivered. Inspectors found the mailer altered computer files to deceive postal acceptance clerks, avoided detection by hiding unsorted mail in late-night dispatches--when verifications were least likely to be performed, and pressured clerks into notifying PSI in advance which portion of the mail would be sampled for verification. The False Claims Action received considerable media attention in the San Francisco area in July. • For almost a year, post offices throughout Northern California were victimized by a scheme involving counterfeit checks. Inspectors identified more than 180 checks that were allegedly written and presented by two co-conspirators. Two suspects were apprehended and charged in June 2002 after fleeing California and leading Postal Inspectors on a chase that extended through Washington State, South Dakota, and Nebraska. Graph Revenue Investigation Results in FY 2002 Criminal cases: 260 Criminal convictions*: 43 Civil cases presented: 1 Civil cases resolved*: 7 Amount ordered or agreed to be paid as a result of a civil prosecutive action*: $1.5 million Voluntary restitution*: $10 million Court-ordered restitution-criminal*: $91.4 million** *May be related to cases from prior reporting periods. **$90.8 million is related to the American Presort, Inc. case Quote: Revenue Assurance Analyst Lois Ress of the Greater Indiana District was recognized by the Postal Inspection Service for her role in identifying a case of postage fraud. In 2001, she alerted Postal Inspectors about a large-scale mailer's suspicious business practices. When the mailer learned he was under investigation and facing a potential False Claims Action suite, he stopped the scheme and paid more than $600,000 as part of a pre-litigation settlement. Inspectors presented Ms. Ress with a plaque and certificate of appreciation for her contributions to this case and others. Quote: Inspectors in New York received a tip from postal officials that led to the March arrest of a mailer accused of counterfeiting metered postage after he forged one of the new information-based indicia products. Postal officials noticed the indicia date was well beyond the date of mailing, and the forged postage was used to mail Express Mail pieces from the suspect's small, home-based business. The FBI participated with the Inspection Service in searching the man's place of business, as he was also a child pornography suspect. The search revealed evidence of both his counterfeiting scheme and his production of child pornography. Embezzlements Employee embezzlements unfortunately occur in all businesses. Postal Inspectors have uncovered a range of such schemes by postal employees: failing to report postal retail sales and using the cash for personal expenses; delaying the reporting of postal sales to fund personal, short-term loans; stealing postal stamps, retail products, or packaging products; and covering shortages in postal funds by submitting bogus reimbursements for nonexistent or inflated business expenses. Postal Inspectors conducted 605 embezzlement investigations during the past fiscal year and identified more than $4.9 million in postal losses. Examples of Inspectors' casework in this area during FY 2002 are summarized below. • A former window clerk from the Schiller Park, Illinois, Post Office was sentenced on July 11 to one year in prison, three years' probation, and $122,454 in restitution for misappropriating postal funds. Postal Inspectors determined the clerk underreported postage sales and failed to properly account for customer meter funds. The clerk confessed to having a gambling problem and had been embezzling postal funds for years to cover his losses. • After an investigation by Postal Inspectors, the former postmaster of Addis, Louisiana, was sentenced on July 11, 2002, to one year in prison, three years' probation and $77,471 in restitution for stealing postal funds. The postmaster failed to remit money order, postage, and vending sales and posted fraudulent or inflated disbursements to her Statements of Account. The postmaster first claimed her office had been robbed at gunpoint several times and that she never reported it, and covered up the losses, because the robbers threatened to kill both her children and grandchildren if she told authorities. When presented with the results of the investigation, the postmaster could not explain the financial discrepancies. • After an investigation by Postal Inspectors, a former postmaster "relief" at the Dewitt, Illinois, Post Office pled guilty to a three-count indictment for embezzling postal funds. The former employee, who also worked at the Lane and Wapella Post Offices, imprinted postal money orders totaling $121,800 at the three offices without submitting payments. A co-conspirator pleaded guilty to a two-count indictment in July 2002 after admitting to cashing postal money orders and retaining $75,000 of the proceeds. • A former remote encoding center manager, who had worked at postal sites in Antioch and Chattanooga, Tennessee, and Bowling Green, Kentucky, was sentenced to 10 months in prison and two years' supervised release and ordered to pay restitution of $94,794 for submitting false information on travel vouchers. The former manager reported personal travel expenses, travel expenses for relatives, vacation expenses, bogus travel and relocation expenses, and duplicate claims for miscellaneous expenses as his official travel expenses. Postal Inspectors also determined he had forged the signature of a non-existent manager as the approving official. • A former Missouri postmaster was sentenced to six months of community confinement, five years' probation, and $88,682 in restitution for embezzling money order funds and committing mail fraud. While serving as postmaster or officer in charge at five Missouri post offices, the former employee issued money orders, which she reported as "official disbursements," to cover personal expenses and her daughter's tuition at a local beauty college. Her restitution includes a payment of more than $34,000 to the Missouri Chapter of the National Association of Postmasters of the United States (NAPUS). As the elected secretary and treasurer, she wrote and mailed NAPUS checks to cover personal expenses. • A former sales and service associate of the Derry, New Hampshire, Post Office was sentenced to one year of probation and $1,266 in fines and restitution for stealing postal funds. Postal Inspectors determined he was responsible for approximately $25,000 in Segmented Inventory Accountability losses. He failed to enter numerous postage transactions in POS ONE (a "point of sale," automated accounting system) and falsified other transactions by understating postage and pocketing the difference between the amounts he reported and what he collected from customers. • The last two defendants in a $64,554 money order embezzlement, directed by a former military postal clerk of the Camp Pendleton Marine Corps Base Post Office, were sentenced in January and March 2002 in a California federal court. Postal Inspectors determined the defendants had assisted the clerk by cashing roughly $60,000 in money orders which had been reported as lost or stolen and leaving no record of the sale. The former clerk imprinted the money orders for $600 each and hired the defendants to cash them; he paid them with methamphetamines. Each defendant was sentenced to five years' probation, and they were ordered to pay a total of $59,354 in restitution. • On May 14, 2002, two former sales and service associates from the Horton Plaza Retail Postal Store at San Diego, California, were each sentenced to one year of probation and total restitution of $11,000 for embezzling postal