2003 Annual Report of Investigations - Text Version

2003 Annual Report of Investigations
Ensuring America's confidence in the U.S. Mail for more than 200 years
United States Postal Inspection Service

A Message from the Chief Postal Inspector February 2004 I am pleased to present this 2003 Annual Report of Investigations of the United States Postal Inspection Service to our key stakeholders: the United States Postal Service, the Postal Service's Board of Governors, members of Congress, and the American public. The mission of the U.S. Postal Inspection Service is to protect the U.S. Mail, postal employees, postal customers, and postal assets, but security efforts headed our list of concerns this past fiscal year. Selected Postal Inspectors were trained to handle incidents of biohazards in the mail, a new Emergency Preparedness and Homeland Security Group was created, and Dangerous Mail Response Teams were deployed-all marking new directions for the Postal Inspection Service in FY 2003. A Security Force Transformation Plan will improve the use of armed personnel, integrate unarmed personnel into the workforce, consolidate existing Control Center operations, and reduce costs overall. U.S. Postal Inspectors in FY 2003 arrested 11,161 criminal suspects, with 56 percent of the arrests for mail theft. Inspectors investigated 3,150 mail fraud cases, arrested 1,453 fraud suspects, and responded to approximately 80,000 consumer fraud complaints. As members of the Department of Justice's Corporate Fraud Task Force, Postal Inspectors played key investigative roles in numerous high-profile fraud cases. Mail fraud investigations resulted in approximately $2 billion in court-ordered and voluntary restitution, and 764 civil or administrative actions. In addition to numerous cases involving bombs, threats, and suspicious items in the mail, Postal Inspectors arrested 320 suspects for child sexual exploitation and obscenity offenses related to the mail, and 1,378 suspects for drug trafficking and money laundering via the mail. Protecting 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 in FY 2003, Postal Inspectors reported $162.3 million in long-term and continuation-of-pay cost-avoidance savings for the Postal Service. Improved recruitment and applicant processing resulted in the hiring of 225 new Postal Inspectors. The new Inspectors represent diversity in every sense of the word and will be a welcome addition to our agency. The U.S. Postal Inspection Service is proud of its accomplishments. We will continue to build on our strengths-safeguarding the safety, security, and integrity of the U.S. Postal Service, postal employees, and postal assets-to ensure the confidence of all Americans in the U.S. Mail. L. R. Heath Leadership Team of the United States Postal Inspection Service October 3, 2003 L. Heath, Chief Postal Inspector M. Freso, Executive Ombudsman L. Katz, Inspector in Charge, Office of Counsel 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. Maxwell, Assistant Chief Inspector, Investigations & Security J. Nedd, Inspector in Charge, Group 1, Safety & Security Vacant, Inspector in Charge, Group 2, Internal & External Investigations C. Giusti, Inspector in Charge, Group 3, Fraud & Dangerous Mail Investigations Z. Hill, Inspector in Charge, Group 4, Emergency Preparedness & Homeland Security H. Lane, Inspector in Charge, Group 5, International Affairs J. Wachuta, Inspector in Charge, Group 6, Intelligence N. Johnson, Assistant Chief Inspector, Administrative Operations V. Bellinger, Manager, Human Resource Performance F. Toogood, Inspector in Charge, Career Development Division L. Spallanzani, Manager, Finance & Administrative Services S. Guttman, Inspector in Charge, Information Technology Division K. Burke, Deputy Chief Inspector, Field Operations, East Inspectors in Charge Charlotte, W. Hall Boston, K. Jones North Jersey/Caribbean, M. Phanco New York, W. Kezer Philadelphia, I. Carle Washington, T. Brady Pittsburgh, R. Dalgleish A. Clemmons, Deputy Chief Inspector, Field Operations, South Inspectors in Charge Miami, J. Belz Houston, R. Dodd Denver, K. Roberts Atlanta, D. Collins Ft. Worth, O. Villanueva M. Ahern, Deputy Chief Inspector, Field Operations, West Inspectors in Charge Detroit, Y. Allen St. Louis, J. Broussard San Francisco, W. Atkins Chicago, A. Davidson Seattle, W. Morris Los Angeles, J. Somerset Introduction 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 1,970 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 1,100 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 Postal 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 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. The National Headquarters offices of the Postal Inspection Service are organized in functional groups that report to the Deputy Chief Inspector for Headquarters Operations. The Postal Inspection Service has 18 field divisions, which report directly to three Deputy Chief Inspectors for field operations. Field offices are supported by four Inspection Service administrative service centers. The National Leadership Team includes four Deputy Chief Inspectors, two Assistant Chief Inspectors, Inspectors in Charge, and 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. Its 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 Postal 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 publications with preventive and informational tips related to mail fraud and other mail crimes for postal employees and the public. C&PA personnel represent Postal Inspection Service interests on Capitol Hill and in liaison activities 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. An Intranet Web site, maintained by the Information Technology Division, facilitates confidential 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. Quote: Most rewarding aspect of being a federal executive: "Knowing that almost every decision you make and action you take impacts peoples' lives, and your decisions and actions can add value to their everyday life, whether it be postal employees or the general public." Best career advancement advice received: "Work hard at whatever assignment you are given and take advantage of every opportunity that comes your way. Do not sell yourself short and never self-restrict your opportunities for advancement." Advice for your successor: "No matter what you think is important, remember the people side of the business. As a leader, always treat people with dignity and respect. Give them what they need to do their job. Reward and recognize good performance. Deal with poor performance timely, fairly and consistently." -From the Federal Times interview with Chief Postal Inspector Lee Heath, "Fighting Fraud, Theft and Terror in the Mail." Fraud and Dangerous Mail Mail Fraud The Mail Fraud Statute is the oldest and the most effective consumer protection law, and the U.S. 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 1,970 Postal Inspectors across the nation, roughly 300 are assigned to mail fraud investigations. Inspectors investigated 3,150 fraud cases this past fiscal year, and Inspection Service analysts prepared nearly 80,000 letters in response to mail fraud complaints. During FY 2003, Postal Inspectors arrested 1,453 mail fraud offenders, and 1,387 were convicted as a result of Inspection Service investigations conducted during FY 2003 and in prior fiscal years. Corporate Fraud Postal Inspectors throughout the country are investigating numerous cases of large-scale corporate fraud, which nearly always involves the U.S. Mail. Inspectors have aggressively pursued executives who falsely represent the health of their companies by manipulating financial statements, or who lie to investors while embezzling their funds-resulting in the victimization of thousands of stockholders. Following the arrest by Postal Inspectors of John Rigas, CEO of Adelphia Communications Corporation, in July 2002, the White House named the Postal Inspection Service a member of its Corporate Fraud Task Force. Among the corporate fraud cases investigated by Inspectors in FY 2003 was one involving U.S. Technologies CEO C. Gregory Earls, who was subsequently indicted on charges of mail, wire, and securities fraud, and accused of diverting $15 million from investors for his own purposes. Quote: “They [the Postal Inspection Service] are the mouse that roared when it comes to whitecollar crime. They only have a few dozen people in a place like New York and they have the impact of hundreds,” said Jim Comey, the U.S. Attorney for Manhattan, whose office is prosecuting Earls and the Rigases. Mail Fraud Against Businesses Postal Inspectors work with members of the business community to help protect them from being victimized by mail fraud. Inspectors have established working groups with private industry to share best practices on fraud prevention, exchange information, and provide updated information on recent fraud schemes. Mail Fraud Against Consumers The Postal Inspection Service emphasizes the importance of consumer awareness and prevention as the best protection for consumers, but many still "take the bait." 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. 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. In FY 2003, Postal Inspectors stopped 144 deceptive mailing operations, up 74 percent from last year. Postal Inspectors have been encouraged by recent findings that promoters are modifying their practices to comply with the law by providing customers with required notices of promotion rules and clearer explanations. 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. Fraud on the Internet Cybercrime presents unique challenges to law enforcement groups. Traditional mail fraud schemes rebound with new success on the Internet, where a greater number of victims can be targeted and perpetrators can remain anonymous. Postal Inspectors investigate Internet fraud when the U.S. Mail is used to facilitate the scheme. Mail Order Fraud The U.S. Postal Inspection Service hosted a meeting of the Business Mailing Data Center (BMDC), formerly known as the Business Mailing Industry Task Force, in Chicago, Illinois, on October 29 and 30, 2002, and in Philadelphia on June 11 and 12, 2003. BMDC works to eliminate fraud in the mailing industry by promoting the sharing of fraud data. The group recently obtained approval from the Department of Justice's Anti-Trust Division and the Federal Trade Commission to allow law enforcement and mailing industry groups to share fraud data. The success of the task force depends on the number of business mailers who agree to share data with other industry members and law enforcement agencies. Telemarketing Fraud Americans receive thousands of unsolicited phone calls each year from telemarketers who are trying to sell a variety of products, often to older citizens. 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 each year. During FY 2003, Postal Inspectors shut down 37 illegal telemarketing operations, a 40 percent increase over the previous year. 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 in FY 2003 to help stem losses from various fraud schemes. Graph Administrative Action, FY2003: Complaints filed by the Law Department - 102 Administrative Action, FY2003: Consent Agreements signed - 62 Administrative Action, FY2003: Cease and Desist Orders issued - 66 Administrative Action, FY2003: False Representation Orders issued - 78 Administrative Action, FY2003: Withholding Mail Orders issued - 43 Administrative Action, FY2003: Temporary Restraining Orders issued - 1 Administrative Action, FY2003: Voluntary Discontinuances signed - 176 Administrative Action, FY2003: Civil Injunctions - 1 A Withholding Mail Order (Title 39, USC 3003) enables the Postal Service to withhold an addressee's mail if he or she is 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 the person to remain anonymous. Fraudulent Foreign Lottery Mail The Chicago Criminal Investigations Service Center (CISC) successfully drafted pleas to stop and destroy foreign lottery mail. There were 43 administrative actions related to foreign lotteries during FY 2003. Postal Inspection Service staff, including CISC employees and Inspector-Attorneys, determined that foreign lottery material mailed from six addresses in Australia and the United Kingdom to the United States was illegal and, therefore, classified as nonmailable. A final order against the mailings was obtained on November 21, 2002. Approximately 164,000 pieces of the illegal mail were destroyed as a result. In June 2003, the Postal Inspection Service group identified similar problems with lottery mailings arriving from the United Kingdom and Australia, resulting in the destruction of 163,943 pieces of mail. During FY 2003, 43 False Representation Orders (FROs) were requested and issued against foreign lottery promoters. FROs enable Postal Inspectors to return mail (most of which contains checks) to victims of false or illegal promotions, thereby stemming losses. To further combat illegal foreign lotteries, Postal Inspectors work with U.S. Immigration and Customs Enforcement (ICE) officials to stop such offerings from entering the U.S. mailstream, and ICE 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 it is subject to destruction and may appeal the notice. If the mailer fails to appeal or loses the appeal, a Destruction Order is issued and the detained mail is destroyed. As a result of Inspectors' coordination with ICE agents and reviews of foreign lottery mail during FY 2003, none entered the U.S. mailstream or needed to be destroyed. Since the initiative began in 1994, approximately 14.6 million pieces have been destroyed. Case Files: Corporate Fraud The chief executive officer and owner of American Tissue, Inc., a major paper products manufacturing company in New York, surrendered to Postal Inspectors and FBI agents in March 2003 on charges of securities, bank, and wire fraud. Inspectors alleged the former executive had created $20 million worth of fictitious sales invoices, enabling his company to borrow millions of dollars from bank lenders. Three other company officials were also charged, as well as an Arthur Anderson senior auditor, who allegedly shredded certain documents after discovering the company had "cooked the books." The company filed for bankruptcy, and thousands of workers lost their jobs. Losses are estimated at $310 million. Four top executives of Charter Communications, a large firm in St. Louis, Missouri, were indicted in July 2003 on 14 counts of mail fraud, wire fraud, and conspiracy related to inflating revenue, cash flow, and subscriber numbers for the company. Postal Inspectors and FBI agents alleged that, when the chief operating officer and chief financial officer realized the company could fall short of its projected year-end totals, they devised a scheme to artificially inflate the numbers. As a result, more than $17 million in bogus revenue and cash flow were reported for the company in the year 2000. A former senior vice president of the company pled guilty to a single count of conspiracy in July 2003. In October 2003, the U.S. Attorney's Office reported that, due to allegations of witness tampering, separate cases will be opened to resolve the charges. Postal Inspectors, FBI agents, and agents from the Securities and Exchange Commission-all members of the President's Corporate Fraud Task Force-arrested three executives of Dynegy Energy in June 2003 in Houston, Texas, on charges of securities fraud, mail fraud, and wire fraud. The two men and a woman allegedly reported their company "loans" as cash flow, rather than debt, in financial tax statements and engineered a complex series of natural gas sales that generated bogus profits of nearly $300 million. The former executives, who are all certified public accountants, were indicted on June 12, 2003. Case Files: Mail Fraud Against Businesses A three-year investigation by San Francisco Postal Inspectors of a $3 million Internet fraud scheme resulted in the arrest of four suspects in December 2002 in Vilnius, Lithuania, by cooperating members of that country's Criminal Police Bureau. The suspects used stolen credit card numbers to buy computers and other items on the Internet, and had the items delivered by U.S. Mail or private courier to commercial mail receiving agencies (CMRAs) in California, where they rented addresses under false names. After the arrests, one of the suspects, who had been released from prison, advised the CMRAs to forward the mail to a CMRA in Willowbrook, Illinois. Inspectors traveled to Willowbrook and arrested a Lithuanian man there, who later pled guilty to picking up the packages in return for payment from his co-conspirators. Postal Inspectors have been working with the corporate offices of the CMRAs to implement an aggressive prevention campaign to identify the schemes and return items to merchants. Despite their efforts, the fraud scheme has resurfaced, and Inspectors are contacting targeted CMRAs to halt mail-forwarding orders from fraudulent mailers. A grand jury in Kentucky convicted the nation's largest viatical settlement company, its president and vice president, as well as a viatical brokerage company and its chief financial officer, on charges of mail fraud, wire fraud, and conspiracy. Postal Inspectors, assisted by agents from the FBI and Kentucky Department of Insurance, found the defendants had helped terminally ill patients obtain large life insurance policies by falsifying their medical conditions and arranging for healthy imposters to take required medical exams. The policies were then sold back to the settlement company, which collected more than $37 million in fraudulent assets. The defendants received sentences ranging from one year of probation to up to 14 years in prison, and were ordered to pay a combined $661,292 in restitution to victims. Postal Inspectors and Secret Service agents assisted Royal Thailand Police in the May 20, 2003, arrest of a Ukrainian man for criminal copyright infringement, trafficking in counterfeit goods, money laundering, conspiracy, and possessing unauthorized access devices. The man distributed thousands of copies of counterfeit software, valued at more than $3 million, over the Internet. He is allegedly part of a large Eastern European ring of computer hackers responsible for fraudulent transactions on nearly 20 million credit cards. Case Files: Mail Fraud Against Consumers A Texas man was sentenced in October 2002 to 10 years in prison and three years' probation, and was ordered to pay restitution of about $1.7 million. Postal Inspectors proved he sold nearly $4.1 million worth of bogus, "FDIC-insured" certificates of deposit to 35 investors in a Ponzi-type scheme. He pled guilty to mail fraud in November 2001. Postal Inspectors determined that a Weston, Florida, man tricked 50,000 people across the country into mailing him $30 to $45 as a "registration fee" in return for stuffing envelopes at home for $2 per envelope. He collected about $2 million before Inspectors shut him down. He pled guilty to mail fraud on May 12, 2003, and sentencing is pending. Three Virginia men and a former member of the Harlem Globetrotters were arrested in June 2003 for defrauding more than 200 investors. Postal Inspectors and agents from the IRS and FBI alleged that, from 1996 through 2000, the men promoted high-yield investment programs that allegedly returned rates above current market values, some as high as 10 percent monthly. They earned investors' trust by using religious beliefs and themes to promote the bogus programs. The defendants collected more than $10 million under 17 business entities and reassured investors by issuing them "promissory notes," which were fake. Victims were told their money was invested in overseas trading programs, international debentures and bonds, the World Bank, and the International Monetary Fund, among other places, but most of their money was deposited in the defendant's offshore bank accounts to pay for personal expenses and to pay interest to early investors in a Ponzi-like scheme. The president of Wellesley Service Inc. in Fort Dix, New Jersey, which merged waste-management and heating-oil firms for sale to larger conglomerates, pled guilty on June 6, 2003, to mail fraud and conspiracy to commit mail and tax fraud. Postal Inspectors alleged the president and his conspirators enlisted investors via private placement ads and promissory notes, guaranteeing them a 15 percent annual return, plus a 50 percent "kicker" upon repayment. The president mailed letters to investors misrepresenting the company's financial well-being and impending deals, and requesting their notes be rolled over for increased amounts, which most agreed to. Between 1995 and 2001, more than 200 people invested $80 million in the company, including a noted mystery writer who invested nearly $20 million. Rather than using the money to fund operations, the president and others looted the company. The president collected nearly $30 million as part of a sham consulting agreement and had his personal expenses paid by the company, including a $2.5 million home, his clothes, and cars. Sentencing is pending. Case Files: Mail Fraud Against State, County, and Federal Government An investigation by Postal Inspectors and agents from the FBI and the Health and Human Services-Office of Inspector General resulted in indictments for four men in St. Louis, Missouri, in January 2003 for a scheme that defrauded Medicare of more than $6 million. The men allegedly used false and misleading statements to sell a medical device to health care providers. The providers were told to bill the product to Medicare as a "miscellaneous supply" to ensure it was covered. Bills for the fraudulent devices were submitted via the U.S. Mail. Postal Inspectors arrested 18 West Africans in February 2003 on charges of tax fraud and identity fraud in New York. One member of the group cooperated with Inspectors and helped them apprehend his cohorts. Beginning in 1997, ring members reportedly stole and then used more than 3,000 Social Security numbers to file false 2002 individual tax returns. Losses to the United States and local governments are estimated at more than $12 million. Postal Inspectors and other law enforcement officers arrested the owner of Metro One Ambulette, which operated several ambulance companies in Brooklyn, New York, on charges of health-care and mail fraud. Inspectors alleged that, from 1990 through 2000, the owner and others submitted fraudulent claims via the mail to Medicare and Medicaid, provided kickbacks in the form of cash and other gifts to hospital employees so they would use the ambulance service, and transferred company assets to another firm to conceal profits. The owner pled guilty to conspiracy to defraud Medicare and Medicaid and was sentenced in December 2002 to six years and six months in prison and three years' supervised release. Additionally, the judge ordered him to pay $57 million in restitution to his victims and $8 million in forfeiture. The former chief of radiation and oncology at Long Island College Hospital pled guilty in January 2001 to soliciting and receiving kickbacks in exchange for referring his patients to the ambulance company, and the director of security at New York Methodist Hospital (a retired New York police lieutenant) pled guilty to similar charges. Postal Inspectors have arrested another 13 suspects, including a lawyer and hospital and nursing home officials, connected with the scheme. Case Files: Deceptive Mail The operator of a sweepstakes scheme in Rock Hill, South Carolina, agreed in March 2003 to cease and desist his mailings and pay the Postal Service $200,000. Postal Inspectors found that respondents to the mailings were called and told they were winners, but had to mail "taxes" or "Customs fees" to collect their money. Victims either received nothing at all or items vastly inferior to what was represented, losing $15,000 to $102,000 apiece in the scheme. Postal Inspectors from the Bos- ton Division obtained a Consent Decree in New York in May 2003 prohibiting Jason Schwartz, of Credit Choice, Inc., from making false or misleading representations in his mail order business. Inspectors alleged he marketed an unsecured credit card with a $4,000 to $7,500 limit to people who were poor credit risks. Victims were led to believe it was a U.S. business, but Inspectors found the operation was in Quebec, Canada. Inspectors first filed a Temporary Restraining Order against the man in October 2002 to halt the operation, freeze its assets, stop the man from selling or transferring client lists, and prohibit him from soliciting credit cards in any manner. The Better Business Bureau is overseeing refunds for victims. Case Files: Fraud on the Internet Postal Inspectors in Detroit, Michigan, identified a man who was auctioning laptops at eBay.com, collecting payments for them, and then failing to deliver them. He was sentenced in January 2003 to two years and nine months in prison and two years' probation, and was ordered to pay more than $61,000 in restitution. Postal Inspectors in Colorado investigated a man in Gilpin County they suspected was the cause of complaints related to purchases made over the Internet. They determined he had been stealing credit card information from rural mailboxes and using the stolen account numbers to order items over the Internet and by phone. His fraudulent purchases were delivered by U.S. Mail. The man was convicted of committing mail fraud and was sentenced in March 2003 to 12 years in prison. Postal Inspectors from the Boston Division arrested a Connecticut woman in April 2003 who had auctioned hundreds of computers at Internet sites under various names, but never provided the computers or refunded her approximately 350 customers their payments. She was sentenced to four years and nine months in prison and three years' probation, and was ordered to pay restitution of more than $800,000 to her victims. Case Files: Mail Order Fraud A man was sentenced on November 21, 2002, to six months' home detention, three years' probation, and a $4,000 fine after pleading guilty to two counts of mail fraud. He supplied in excess of $350,000 in unredeemed, manufacturers' cents-off coupons to the owner of three grocery stores. From 1992 through 1997, the store owner fraudulently submitted to manufacturers more than 3.7 million unredeemed coupons, valued at more than $2.3 million, which had not been used to buy goods, as required. As a result of an investigation by the Postal Inspection Service and the IRS in Pennsylvania and New Jersey, two men were sentenced on January 16, 2003, to six months' home detention, five years' probation, and 300 hours of community service. They were also ordered to pay the IRS taxes they owed, plus penalties and interest. The men mailed in excess of 1.9 million manufacturers' rebate cents-off coupons, worth more than $1 million, to coupon redemption centers over a four-year period and failed to report more than $93,000 worth of income. A New Jersey man pled guilty in April 2003 to mail fraud and admitted using false names and addresses to open hundreds of customer accounts at two popular record clubs. He and an associate took advantage of promotions that offered nine or more free music CDs with the purchase of one at the regular price. Postal Inspectors learned the defendant and his cohort collected 48,198 CDs in this manner and then sold them at flea markets. They used at least 53 mailing addresses at post offices and commercial mail receiving agencies to receive the CDs. Industry losses were estimated at $772,000. Additional charges are pending. Postal Inspectors in Pittsburgh investigated a computer intrusion and merchandise reshipping scheme that robbed victims of close to $5 million. Two Pennsylvania men gave Inspectors information against the ringleader of the scheme and helped identify a number of co-conspirators in Georgia, Louisiana, and Romania. Each man was sentenced in June 2003 to six months' home confinement and four years of supervised release, and was placed in a drug rehabilitation program. They were also ordered to pay restitution of approximately $96,000 to their victims. Case Files: Telemarketing Fraud More than 38,000 people lost close to $15.4 million to the operator of a sophisticated-but fraudulent-telemarketing scheme. The man convinced timeshare owners to pay $400 for unit appraisals by relying on misrepresentations to win them over, such as promising the unit would be purchased once it was appraised. At sentencing, the judge stated that Postal Inspectors had uncovered "the most corrupt, the most extensive, and the most sophisticated mail fraud scheme this Court has ever seen." Seven others, including three of the operator's children and his son-in-law, were convicted for their roles in the scheme. The operator was sentenced in Hyannis, Massachusetts, in October 2002 to seven years in prison and three years' probation, and the judge imposed a fine of $142,000, representing the defendant's assets in an Austrian bank account. A Cape Cod real estate broker who Postal Inspectors proved had defrauded 10,000 timeshare owners of more than $4.5 million was sentenced in January 2003 to three years in prison and three years' probation, and was ordered to pay a $98,000 fine. Similar to the above case, Postal Inspectors found the broker and his assistants talked people into having their units appraised by promising the units would be purchased following the appraisal. Few paying customers received offers, and the offers that were made were far below market value. At sentencing, the judge told the broker that the appraisal companies he worked for were "a sham from the get-go" and that the broker "knew it was a scam." In October 2002, the last of five defendants charged in a telemarketing scheme in Marina del Rey, California, was sentenced after Postal Inspectors proved that the operator, three of his salesmen, and a sales "reloader" had pressured people into purchasing precious metals margin accounts. The operator initially sold investments in platinum, but once people mailed in their money, another salesman would call and try to talk them into investing in precious metals, collectable coins, heating oils, or foreign currency margin contracts. Sentences for the defendants ranged from three years and 10 months in prison, with orders to pay restitution of $3 million, to a year of in-home detention with orders to pay $286,000 in restitution. As the result of Project Colt, a multi-agency task force of Postal Inspectors and other law enforcement agents targeting cross-border telemarketing fraud, a Quebec citizen living in Massachusetts was sentenced on March 26, 2003, to 10 years in prison and three years' probation, and was ordered to pay more than $1.2 million in restitution. Telemarketers posed as attorneys or government officials and targeted mostly elderly people who had lost money in other bogus lotteries. They told victims they could get their money back if they mailed in "taxes" or "advance fees," but, unfortunately, those who responded to the calls were victimized a second time. The defendant was sentenced to an additional two years and three months in prison in Florida for victimizing a resident of that state. Case Files: Administrative Actions Related to Mail Fraud Postal Inspectors in Boston learned a company and its promoter had mailed thousands of postcards advertising an unsecured, major credit card with a $4,000 to $7,500 limit to people who were poor credit risks. The card allegedly could be obtained by calling an "800" number, which Inspectors determined was in Quebec. Telemarketers convinced people to authorize $199 debits from their checking accounts in exchange for the cards, but all respondents received for their money was a catalog, a membership card, and an application for a credit card offered by a bank. Although a Temporary Restraining Order was issued on October 17, 2002, the quick action taken by Inspectors failed to help victims, who apparently mailed millions of dollars to the scamsters. A Tennessee man signed a Cease and Desist Order in November 2002 and agreed to stop operating a work-at-home scheme. Postal Inspectors in Atlanta found he had been running ads in a local newspaper, offering jobs "stuffing envelopes." Those who called and left their addresses received a "Homeworker's Application" in the mail, requiring a $25 deposit. The application promised a payment of $1.40 for every envelope stuffed and sealed, and guaranteed incomes of $700 to $1,400 each week, plus bonuses. No one received any money except the promoter. A Cease and Desist Order issued in January 2003 halted a scheme that offered people a report of the procedures for entering sweepstakes with millions of dollars in winnings. Customers were led to believe they were entering a contest, rather than purchasing a report about it, and mailed the requested $39.95 to an address in St. Louis, Missouri. The address turned out to be a UPS Store (a commercial mail receiving agency) that had instructions to forward the mail to Vancouver, Canada. Postal Inspectors determined that, between March 2001 and February 2002, roughly 58,000 pieces of mail were forwarded, but none of the respondents received a report. Postal Inspectors shut down a North Carolina woman's fraudulent work-at-home scheme in March 2003 after a postmaster reported that customers had problems with a company that was renting a non-commercial post office box. Inspectors traced the mail to local ads for envelope-stuffing jobs that instructed interested takers to call a number and leave their names and addresses. Respondents received flyers in the mail guaranteeing that, for a $25 fee, they would get materials allowing them to earn $700 to $1,400 per week, or $1.40 for each envelope they stuffed and sealed. The $25 fee would be refunded with the first paycheck, and they would also receive an "up-front $225 sign-up bonus." The woman signed a Cease and Desist Order on March 14, 2003. Two Virginia men accused by Postal Inspectors of operating a fraudulent billing scheme signed a Voluntary Discontinuance Agreement in January 2003. They agreed to close the post office box they rented in Winchester to run the scheme and that future incoming mail would be endorsed by the Postal Service as "Post Office Box Closed" and returned to senders. Inspectors determined the men had mailed about 500 bogus invoices to customers of a recycling and disposal service, requesting a $29.97 payment for trash recycling and disposal services they never provided. New York Postal Inspectors Uncover $100 Million International Investment Fraud In a case precipitated by the September 11, 2001, terrorist attacks on the World Trade Center in New York, U.S. Postal Inspectors from the Brooklyn Fraud Team exposed an elaborate investment scam by Evergreen International Spot Trading, Inc. Evergreen represented itself as a foreign currency trading company with three New York offices, and an affiliated clearing firm, First Equity Enterprises, Inc., located on the 15th floor of Two World Trade Center. Using aggressive telemarketing tactics, Evergreen's staff attracted more than 2,000 investors in the United States, Australia, New Zealand, and Europe who were interested in foreign currency trading. Beginning in 1997 and through 2001, investors poured more than $189 million into the company. Evergreen now owes them more than $100 million. Postal Inspectors first learned of problems with Evergreen in September 2001, in the days following the terrorist attacks on the World Trade Center and elsewhere. Worried investors tried to contact their brokers at Evergreen to determine the fate of First Equity and whether its employees and their accounts were safe. They quickly learned their money was gone-and not as a result of terrorism. Evidence collected by U.S. Postal Inspectors revealed that, while Evergreen's brokers mailed customers sales brochures and account statements showing high profits, at least 10 of its employees-including the president, director of operations, chief trader, and chief financial officer-conspired to direct customers' money through First Equity Enterprises, Inc., to a sham entity in Budapest, Hungary, known as Forex International, Ltd. Evergreen told investors that First Equity was an independent clearing firm that would maintain and accurately account for their money. In fact, Inspectors determined that both Evergreen and First Equity, as well as Forex International, were owned and controlled by Andrei Koudachev, and Evergreen was its only client. Evergreen's employees, including chief trader Mamed Mekhtiev, misrepresented themselves as officers and directors of First Equity, and Evergreen's director of operations, Philip Levenson, regularly provided trading data to First Equity, their alleged clearing firm. Evergreen brokers Justin Fauci, Papaemmanual, and Pasqualini assured investors the company used legitimate banks for trading and their funds were secure. The men even provided bogus reference letters from legitimate banks to validate their claims. Inspectors, however, determined that Evergreen never conducted any trading with those banks. Instead, Evergreen used First Equity to transfer large sums of investors' money to Forex International in Hungary, which then transferred it to accounts in Latvia and Cyprus. A review of the accounts disclosed that $600,000 was sent from a Forex account to the personal bank account of Fauci, Evergreen's U.S. sales manager. Worse, any money from First Equity investors that was not transferred to Forex was used by chief financial officer Polina Sirotina to pay millions of dollars in bonuses, commissions, and personal expenses to Evergreen's employees. Fauci, Papaemmanual, Pasqualini, and other Evergreen brokers routinely solicited money from investors based on false representations of their professional qualifications. After Koudachev departed the United States and his associate Habarov refused to return money that had been transferred to Forex, the defendants continued to draw funds from First Equity accounts. This included a $500,000 bonus for Mekhtiev and a $99,000 bonus for Sirotina. Postal Inspectors arrested Gary Farberov, president of First Equity Enterprises, Inc., and he pled guilty in November 2001. Justin Fauci trained the brokers on how to misrepresent Evergreen's offerings. After learning investigators were on his trail, Fauci contacted the U.S. Postal Inspection Service and the U.S. Attorney's Office in the Eastern District of New York, claiming he and the other Evergreen employees were victims of a fraud and embezzlement scheme perpetrated by Koudachev. Albert Guglielmo, Evergreen's president; Philip Levenson, director of operations; Mamed Mekhtiev, the chief trader; and Polina Sirotina, chief financial officer, were all convicted on June 27, 2003, after an 11-week jury trial. Inspectors to date have seized $6.5 million of victims' money from bank accounts in New York, New Jersey, Chicago, and Switzerland. Eleven individuals and two corporations have been charged, five people have pled guilty, and four have been convicted by trial, with sentencing scheduled for March 2004. Koudachev and Habarov remain fugitives since their indictment in May 2002. An arrest warrant for Mamed Mekhtiev was issued on August 27, 2003, after he violated the terms of his pre-sentencing release and became a fugitive. It is believed he fled to Russia. Operation Headwaters: Abbott Laboratories to Pay $614.5 Million for Defrauding Medicare, Medicaid, and Consumers Investigators with Operation Headwaters, an undercover sting initiated by the U.S. Postal Inspection Service, the FBI, and the Health and Human Services-Office of Inspector General, alleged that Ross Products, a division of Abbott Laboratories in Illinois, and CG Nutritionals, Inc. (CG), a wholly owned subsidiary, were responsible for a multimillion-dollar health care fraud. Inspectors found that Abbott had defrauded Medicare, Medicaid, and consumers by conspiring to bill the programs for products that are provided to suppliers at no cost. Further, Abbott offered illegal rebates and kickbacks to suppliers (and to undercover investigators posing as suppliers) in return for fraudulent billings. Abbott agreed to criminal and civil settlements related to the sales and marketing of its enteral-feeding pumps and other items used to help ill patients ingest meals normally. CG pled guilty in July 2003 to a criminal information for its complex mail fraud scheme and for obstructing a criminal investigation of its health care offenses. The guilty plea and settlement required CG (Abbott) to pay $614.5 million in fines and restitution. CG was sentenced to five years' probation and has paid a $200 million fine. CG also reached a civil settlement with the government and paid $400 million in restitution to resolve Medicare and Medicaid losses. CG paid an additional $14.5 million to various state Medicaid programs based on a settlement crafted by the National Association of Medicaid Fraud Control Units. CG will now be permanently excluded from participation in the Medicare and Medicaid programs. Finally, $20 million of the criminal fine was paid to the U.S. Postal Inspection Service's Consumer Fraud Fund. Postal Inspectors were called by the U.S. Attorney's Office in New Jersey to investigate Kevin Jackson after he attempted to redeem what he said was a 1934 Federal Reserve note with a face value of $100 million. Inspectors and Forensic Analysts worked to prove that Jackson's note was bogus, and he was sentenced on October 3, 2002, to four years and three months in prison, plus three years' probation, for one count of conspiracy and two counts of mail fraud. USPSNEWSLINK Thursday | September 18, 2003 FRAUD BUSTER Magazine praises Postal Inspector Postal Inspector Steve Hamilton helped bust one of the biggest fraud cases in recent history, says Car and Driver magazine. Two Los Angeles men were arrested and recently convicted on charges of fraud and money laundering, according to the article from the October issue. Robert Gomez and James Nichols operated Miracle Cars-a bogus company preying mostly on church congregation members by selling, but never delivering, late-model cars at greatly reduced prices. The cars were supposedly part of Nichols' inheritance and were locked in probate, said the magazine. Inspector Hamilton and Treasury Agent Gary Marshall tracked Miracle Car's bank records, showing more than $21.1 million passed through the company's various accounts. Thanks to the efforts of Inspector Hamilton, Agent Marshall, and other law enforcement officials, the two scam artists were convicted of 40 counts of fraud and money laundering, said Car and Driver. Inspectors Disrupt Deceptive Mailing Operation Presort mailer Postal Services, Inc. (PSI) contacted Postal Inspectors in March 2003 at the Omaha, Nebraska, office to report what they thought could be an improper mailing. The mailing was a solicitation to purchase lottery numbers for a fee of $50. Preaddressed envelopes for returning the fee were addressed to the International Winners Group in the United Kingdom. Postal Inspectors determined the person who initiated the mailings was from Brisbane, Australia, and had probably violated the Federal Lottery Statute. The operator flew to the United States several times to met with PSI representatives about what he referred to as his "marketing solicitations." He was also doing business in Dallas, Chicago, and New York, using a foreign bank account in Australia to pay for the mailings via an electronic fund transfer to PSI's account in Omaha. Alleging the mailing was in violation of Title 18, USC 1302, an Inspector prepared a written declaration that the 165,000 piece mailing (seven pallets of boxes) was not legally mailable, so that it was detained until the Postal Service's Law Department filed an official ruling of nonmailability in September 2002. On August 28, 2003, the U.S. Postal Service's Chief Counsel issued a Destruction Order for the Australian foreign lottery mailing, and Postal Inspectors destroyed the mail in September. Postal Inspectors are now on the lookout for foreign lottery operators who send prepared mailings via private courier to presort houses in the United States, in order to bypass ports of entry. Mail Bombs and Other Prohibited Mail 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 U.S. Postal Inspection Service considers the investigation of mail bombs among its highest priorities. In FY 2003, Postal Inspectors arrested 99 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. Graph Mail Bomb Incidents: Five-Year Trend 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 FY 03: 2 Incidents, 1 Explosion, 0 Injuries, 0 Deaths Biohazard Detection System The Postal Inspection Service's new Dangerous Mail Response Teams responded to the July 7, 2003, pre-production testing and deployment of a biohazard detection system (BDS) at 14 postal facilities across the United States. The Dangerous Mail Response Teams are charged with reporting to postal facilities in the event of a biohazard alert. Team members comprise Postal Inspectors who have been specially trained to enter hazardous environments and perform critical functions, such as gathering evidence. A total of 46 Postal Inspectors have been trained to be Hazardous Waste Operations and Emergency Response Standard (Hazwoper) Technicians. As BDS is deployed to postal facilities across the country, additional teams of Inspectors will be trained to support the Postal Service's emergency-preparedness plans. Case Files: Bomb Threats, Hoaxes, and Placed Devices Following a four-day trial in Cynthiana, Kentucky, a man was convicted in March 2003 on seven offenses related to two pipe bomb incidents and other crimes committed against the U.S. Postal Service and its employees between 1998 and 2002. The man tried to murder a rural carrier associate, who delivered his mail, with pipe bombs. Prior to the incident, Postal Inspectors and agents from the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) determined the man had been making unsubstantiated complaints about his mail delivery for the past five years. The conviction carries a mandatory sentence of 30 years in prison. Postal Inspectors in Massachusetts reported the arrest of a man on July 3, 2003, who allegedly placed explosive devices in mailboxes in Massachusetts, New York, New Hampshire, and New Jersey over two years. During Memorial Day weekend, several mailbox explosions occurred in Massachusetts. A task force of Postal Inspectors, ATF agents, Massachusetts State Police, and officers from the Bernardston, Massachusetts, Police Department identified the man and obtained evidence against him. He admitted using explosives to destroy mailboxes, despite being arrested for blowing up a phone booth in 1977. Case Files: Other Prohibited Mail Following an investigation by Postal Inspectors, a West Virginia man was sentenced in November 2002 to 16 years in prison and three years' probation. Inspectors proved he had mailed letters containing threats and a white, powdered substance to President George Bush, West Virginia Governor Bob Wise, a U.S. District Court judge, and other government officials. A Massachusetts woman was sentenced in November 2003 to one year and a day in prison and was ordered to pay a $45,000 fine, as well as restitution to agencies affected by her actions. The 69-year-old woman admitted she had mailed 16 threatening letters, including six laced with white powder, at the height of the nation's anthrax scare. The letters were sent to Massachusetts Attorney General Thomas Reilly, members of Reilly's staff, and a Superior Court judge-all of whom were involved in prosecuting the woman on charges of Medicaid fraud. The letters contained words and phrases cut from newspapers and magazines to form death threats, with references to Osama bin Laden and the al Qaeda terror network. A Pennsylvania woman was sentenced to two years and six months in prison and two years' probation in February 2003 for mailing threatening letters to the President of the United States and local government officials. The woman and an accomplice mailed threatening letters containing cornstarch in October 2001, during the anthrax crisis, to local prosecutors and law enforcement officials in retaliation for their criminal prosecution of her juvenile son. The pair also mailed a letter to the President, using the return address of a witness who had testified against her son, hoping to create problems for the person. The woman's accomplice was sentenced to a year and two months in prison and two years' probation. Postal Inspectors, Secret Service agents, Luzerne County District Attorney detectives, and Wilkes-Barre and Nanticoke, Pennsylvania, police investigated the incident. An Urbana, Illinois, man was sentenced in March 2003 to one year in prison and three years' probation for mailing death threats to several people and their families, with whom he was having personal disputes. The man is already serving a 20-year sentence in Arkansas for raping a nine-year-old boy. Postal Inspectors used forensic evidence from the Inspection Service's National Forensic Laboratory to back their allegations. A 25-year-old woman was sentenced in June 2003 to seven years and three months in prison for sending anthrax hoax letters to police and a hotel in Hawaii. The woman was the first person to be convicted and sentenced under a late 1990s federal law concerning threats of using a weapon of mass destruction. The judge imposed two enhancements to the sentence due to the substantial disruption her actions caused to interstate commerce and because she caused an obstruction of justice when she lied in a suppression motion. Postal Inspectors were assisted in the case by the FBI's Joint Terrorism Task Force and the Honolulu Police Department; the Inspection Service's National Forensic Laboratory provided evidence that led to the woman's prosecution. What is BDS? The United States Postal Service is committed to keeping its employees and customers safe. To help counter the threat of anthrax in the mail, the Postal Service has developed a biohazard detection system (BDS) that will detect anthrax in the mail. The system is designed for the highest possible level of detection. Technical Information What is BDS? BDS stands for biohazard detection system. It is proven technology designed exclusively for the Postal Service. BDS uses sophisticated DNA matching to detect the presence of anthrax (bacillus anthracis) in the mail. It tests air samples from mail-canceling equipment. The BDS unit consists of an air-collection hood, a cabinet where collection and analysis devices are housed, a local computer network connection, and a site controller-a networked computer. Why is BDS needed? BDS will enable early identification of anthrax. It also provides for a rapid response if anthrax is detected. How does BDS work? All BDS processes are automated. The equipment collects samples of air as the mail moves through a canceling machine. It absorbs airborne particles into a sterile water base. This creates a liquid sample that can be tested. The liquid sample is injected into a cartridge, and the automated test for a DNA match is performed. What is the science behind BDS? The core of the system is a polymerase chain reaction. The process essentially "photocopies" genes of a sample. There is a template for the anthrax DNA sequence. The test sample is compared to the anthrax template to see if there is a match. How long does a complete BDS test take? It takes approximately one hour. How many air samples will be taken during the day? Continuous air collection will take place while the canceling operation is underway. There are no gaps. How do you find out if there is a positive match? If there is a DNA match, the BDS computer network conveys that information to the site-controller computer. Local management is notified directly by on-site BDS personnel and also by multiple forms of electronic communication from the BDS site controller. Can BDS equipment test for other biohazards? For purposes of the test, the system is fully capable of testing for anthrax. In the future, it could be adapted to test for other biological threats. Response What happens when the alarm goes off? The emergency action plan is activated. The facility's building alarm sounds and everyone in the building is evacuated. An Emergency Notification Center at Postal Service Headquarters will be notified, as well as community "first responders." Upstream and downstream processing facilities will also be notified. Data flow will be automatic. That means the question of how to respond is not left up to individual or local decision-makers-many decision-makers within the system are involved. Once postal employees are outside the building, what will be done for their safety? Supervisors will call the roll and ensure everyone in the building has been evacuated. They will explain the nature of the incident, and everyone will wait for direction from community emergency personnel. Postal Inspectors will re-enter the building to verify that everyone has been evacuated. Will medication be offered? Local public health officials will determine the need for any medication. Are further tests performed after a positive BDS result? An outside lab will perform multiple plate cultures using the BDS positive test sample and other environmental samples-e.g., a wet-wipe or HEPA-SOCK filter samples. How long will it take to get an outside lab result? It will take 48 to 72 hours. Timeline and Logistics When did you begin to develop BDS? Within days of discovering that anthrax had been found in the mail system, the Postal Service commissioned the first-ever rapid test for biohazards in the mail system. Extensive research and testing resulted in a combination of the latest technologies. Will the Department of Homeland Security be notified of a positive test result? Yes, it will be notified. Has the BDS been tested? The Postal Service conducted extensive testing and research, beginning in October 2001. The Executive Office of Science and Technology Policy created an interagency work group that reviewed the performance of BDS and confirmed with its own tests that it is the best possible system the Postal Service can field. In June 2002 the first prototype BDS system was installed in the Baltimore Processing and Distribution Center. It has been operating successfully. Mail Service Issues Does BDS slow mail processing? No, the equipment operates normally. What happens to mail inside the plant if BDS results in a positive test for anthrax? The mail will be retained until it is safe for delivery. If operations are suspended, what will happen to new mail that would normally be processed in the facility? Mail will be diverted to other mail-processing facilities, and delivery operations will proceed from there. Are you still irradiating the mail? We are still irradiating all mail in Washington, DC, that is addressed to federal offices in the 202-205 ZIP Code range. If BDS is as successful as we believe it will be, it could lead to a rethinking of how we use irradiation. Manufacturers Who makes the BDS system? Northrop Grumman, Smiths Detection of Edgewood, MD, and other team members designed a prototype BDS system that has been operating at the Baltimore Processing and Distribution Center since June 2002. Other team members are Cepheid, Inc., of Sunnyvale, CA, and MRI-Midwest Research, Inc./Sceptor Industries of Kansas City, MO. When did the Postal Service award the contract for BDS? In December 2002, the Postal Service awarded Northrop Grumman and the other team members a pre-production contract to expand and continue testing BDS at 14 sites. Child Exploitation 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 offered remarks at the first White House Conference on Missing and Exploited Children, held October 2, 2002, and hosted by President Bush to promote public awareness and generate recommendations for "best practices" from experts in the field. More than 600 people from across the country attended the event. Other speakers included First Lady Laura Bush, Attorney General John Ashcroft, and Secretary of State Colin Powell. President Bush delivered the keynote address. Inspector in Charge Lawrence Maxwell and Inspector-Program Manager of Child Exploitation Raymond Smith met with President Bush on October 23, 2002, and personally briefed him on the work of the Postal Inspection Service in combating the sexual exploitation of children. The President asked for information on Operation Avalanche, an undercover operation conducted in his home state of Texas, involving a large-scale child pornography business, Landslide Productions. The President learned that, as the result of the Inspection Service-led investigation, the largest commercial child pornography enterprise ever encountered was dismantled. As the investigation expanded to cities around the world, Operation Avalanche became the largest global action ever undertaken against child pornographers. Attorney General John Ashcroft presented an award in December 2002 to Postal Inspector Raymond Smith at the Department of Justice's Criminal Division's Award Ceremony. The Inspector was commended for his invaluable expertise with and assistance to the Child Exploitation and Obscenity Section's national efforts in combating the sexual exploitation of children and the Attorney General's commitment to enforce federal obscenity laws. In May 2003, Attorney General John Ashcroft presented Miami Division Postal Inspector Beth Bendel with one of six national awards at a ceremony held in cooperation with the National Center for Missing and Exploited Children. The Inspector and other national award recipients were again honored at the Congressional Breakfast and National Missing and Exploited Children Awards Ceremony. During the ceremony, the prestigious Officer of the Year Award was also presented to Miami Inspector Bendel for her exemplary investigation of a mail order child pornography distributor in Florida. It was the fifth consecutive year that a Postal Inspector received the prestigious award for outstanding investigations involving the sexual exploitation of children. Further, a Postal Inspector has been named Officer of the Year three times over the past five years. No other agency has achieved such acclaim. The exchange of child pornography by mail is often accompanied by communication over the Internet. Child molesters and pornographers 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 a marked 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. The vast majority of child exploitation cases investigated by Postal Inspectors in FY 2003 involved computers, as well as postal violations. Since the passage of the Child Protection Act of 1984, Postal Inspectors have arrested 4,027 suspects for using the mail in violation of federal child exploitation laws. During FY 2003, Postal Inspectors arrested 310 suspects for child sexual exploitation offenses and reported 283 convictions in such cases from that and prior fiscal years. Incident to a search of a suspect's property, Postal Inspectors may find evidence that the target of the investigation is also a child molester. As a result of Inspectors' casework this past fiscal year, 91 child molesters were identified and 229 child victims saved from potential further abuse. Obscenity The U.S. Postal Inspection Service has investigated mailings of obscene matter for more than a century. In the 1860s and 1870s, Post Office Inspectors tracked down European "smut peddlers," who brought obscene material to America. Anthony Comstock, a New York Post Office Inspector, waged a relentless battle against those who used the U.S. Mail to distribute obscenity. In 1873, Inspector Comstock drafted the nation's first enforceable federal obscenity law, which became known as "The Comstock Act." It was the forerunner of today's postal obscenity statute, Title 18, U.S. Code, Section 1461. The Internet is now the most-used venue for advertising obscene material and introducing it into American homes-where it easily reaches young children. Dealers of obscene matter try to use the U.S. Mail to distribute the illegal material, in violation of federal law. In the late 1990s there was little federal interest in prosecuting obscenity dealers, but the Department of Justice has now called for a renewed focus on obscenity prosecutions to deter the production and distribution of obscene material. Case Files: Child Exploitation A man in Merriam, Kansas, was sentenced to 24 years and six months in prison for repeatedly raping his six-year-old daughter. At the December 2002 sentencing hearing, the state prosecutor called it the worst case of child sexual abuse he had ever prosecuted. The offender was identified during a Postal Inspection Service investigation of illegal child pornography mailings. Statements made by the suspect during the undercover investigation led Inspectors to fear a child was in imminent danger, so they immediately obtained a search warrant for the man's home. Inspectors seized information from the house allowing them to rescue his daughter from further abuse. A man who bought child pornography videotapes through the mail from Russia and reproduced them for sale in the United States was sentenced on December 13, 2002, in Louisville, Kentucky, to nearly 11 years in prison. Postal Inspectors found he had advertised the illegal tapes on the Internet and sent them to customers via insured mail. A Catholic priest in Chicago was sentenced on January 30, 2003, to 20 years in prison on child pornography charges. Postal Inspectors and agents from U.S. Immigration and Customs Enforcement found the priest had bought CDs containing child pornography from an Internet site based in New Zealand; the CDs were sent to him via the U.S. Mail. Inspectors who searched his home seized more than 2,500 images of child pornography, including boys as young as three years old being tortured and confined in cages. At sentencing, a number of his victims testified about the devastating effects his abuse has had on their lives. The now-former priest admitted he had no idea how many children he had molested, but guessed it was in the hundreds. A five-year investigation by Postal Inspectors and Customs Enforcement agents resulted in the conviction of a 47-year-old man in Dyer, Indiana, in February 2003 after a four-day jury trial. Postal Inspectors determined he was running a child prostitution ring disguised as a tourist resort in Acapulco, Mexico, and customers mailed him payments to buy sexual activity with children. The man had a previous conviction in 1988 on state charges for molesting an 11-year-old boy, and now faces up to 50 years in prison. Six others associated with the ring were also convicted and have received sentences of up to 60 years in prison. Postal Inspectors and local law enforcement officers arrested a former Forest Grove, Oregon, community resource police officer and youth sports official on May 1, 2003, after he received a child pornography videotape through the mail. The man told Inspectors he wanted to stop hurting children, and then confessed to molesting at least seven youngsters, including his own stepson, over an eight-year period. New York Postal Inspectors led a multi-agency investigation of the activities of a 58-year-old man in Rochester with a 30-year history of child molestation. Inspectors determined he had been mailing letters to young boys to entice them into sexual encounters. One of his victims attempted suicide twice and required psychiatric treatment. The offender was sentenced to 12 years and four months in prison, and he was ordered to pay $29,000 in restitution to his victims. A Minneapolis, Minnesota, man pled guilty on August 19, 2003, to traveling across state lines to engage in sexual activity with underage children and to produce child pornography. His plea resulted from an investigation that began in November 2002, when an Iowa mother called Postal Inspectors after finding child pornography in a package mailed to her son. Inspectors identified the mailer and determined he had traveled from Minnesota to Iowa several times to molest the woman's teenage son, his 10-year-old brother, and his 12-year-old sister. He took sexually explicit pictures of the 10-year-old boy. Inspectors found more than 15,000 child pornography images on CD-ROM disks at his home. Case Files: Obscenity A Kentucky man pled guilty in December 2002 to mailing obscene material and money laundering after he was arrested by Postal Inspectors as he walked out of the Science Hill Post Office. An undercover investigation deter-mined he used his Internet site, "Taboomovies," to advertise videotapes depicting brutal rape and bestiality, and his post office box address to mail and receive orders. Inspectors executed search warrants at several locations and seized the man's videos, video duplication equipment, mailing supplies, and financial records. On August 6, 2003, a 10-count indictment was returned against a North Hollywood, California, company and its owners in Pittsburgh, Pennsylvania, following a seven-month investigation by Postal Inspectors and Los Angeles detectives. The charges resulted from the company's distribution of videotapes and DVDs, depicting rape and violent sexual abuse, to individuals and wholesale distributors throughout the United States via the U.S. Mail. Four people pled guilty to obscenity charges on August 25, 2003, in Beckley, West Virginia, after an investigation by Postal Inspectors conducted in close cooperation with federal prosecutors from the Child Exploitation and Obscenity Section of the Department of Justice. Inspectors determined the four suspects, who worked in Lewisburg and in Quitman, Georgia, used an Internet site to sell videotapes and DVDs depicting sexually explicit scenes of defecation and urination, and distributed the material via the U.S. Mail. Illegal Drugs and Trafficking The Postal Inspection Service interdicts mailings of illegal drugs and drug proceeds to protect postal employees from the violence 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 1,378 suspects in FY 2003 for drug trafficking and money laundering via the U.S. Mail. Seizures from the mail included roughly four and one-half tons of illegal narcotics. Postal Inspection Service investigations also resulted in the seizure of about $2.8 million in cash and monetary instruments, four vehicles, and 18 firearms. At the annual awards banquet of the High Intensity Drug Trafficking Area (HIDTA) Program held in December 2002, U.S. Postal Inspectors from the Philadelphia, Chicago, and Los Angeles Divisions received awards for their outstanding work in narcotics investigations. HIDTA was created by the Executive Office of the President and operates under the direction of the Office of National Drug Control Policy. Its mission is to coordinate drug-control efforts of local, state, and federal law enforcement agencies in critical regions of the country to eliminate or reduce drug trafficking and its harmful consequences. An HIDTA Task Force, led by Postal Inspectors in the Philadelphia Division, was named "Outstanding Interdiction Group of the Year," and Inspectors in Chicago and San Diego were recognized for their successful investigations targeting narcotics conspiracy and drug trafficking. Case Files: Illegal Drug Trafficking A two-year, multi-agency Organized Crime Drug Enforcement Task Force (OCDETF) investigation by the Postal Inspection Service and agents from the FBI, IRS, and the 20th Judicial Task Force targeted a Los Angeles, Memphis, and Nashville drug trafficking and money laundering ring. Investigators arrested 35 suspects in Tennessee who were convicted of shipping more than 3,000 pounds of marijuana via Express Mail, FedEx, and UPS and "laundering" roughly $1.2 million via Western Union to suppliers. Task force members tracked and analyzed phone calls between gang members and conducted numerous interviews, proffers, and financial profiles in Tennessee and Los Angeles in their efforts to dismantle the organization. Three defendants were convicted of conducting a continuing criminal enterprise and received sentences of at least 15 years and up to 20 years in prison. On December 12, 2002, Postal Inspectors, agents from the DEA and FBI, and local police arrested six members of a major drug trafficking organization and seized more than $530,000 in assets and cash. Three other members of the ring were arrested later. The 46-count indictment against the nine defendants included charges of money laundering, felony possession of a firearm, and conspiracy to distribute cocaine, crack cocaine, and heroin. From late 1998 through 2002, ring members distributed at least 5 kilograms or more of cocaine, 50 grams or more of crack cocaine, and at least 1 kilogram or more of heroin in the areas of Chesapeake and Norfolk, Virginia. Six of the nine defendants pled guilty and received sentences ranging from 14 to 24 years in jail. The remaining three, including the ringleader, were found guilty by a jury. The son of the ringleader, who also pled guilty, was a significant witness for the prosecution. A California man was sentenced to life in prison on October 3, 2003, for running a multi-state drug conspiracy. His ring shipped at least 20 kilograms of cocaine a month to St. Louis, Missouri, from Los Angeles, California, and McAllen, Texas. Couriers transported the cocaine to St. Louis in cars with electronically controlled, hidden compartments and sent the proceeds via Express Mail to CMRAs in Los Angeles. Evidence introduced by Inspectors at trial revealed the man sent more than 240 Express Mail packages, each containing between $6,000 and $8,000 in cash, in a single year. Postal Inspectors were joined by agents from the DEA and FBI in the investigation of a Birmingham, Alabama, man who was subsequently sentenced to two years and three months in prison and 10 years of probation for distributing more than 18 pounds of methamphetamine through the mail. His cohort was sentenced to seven years in prison and five years of probation for related activities. Postal Inspectors in Los Angeles and in Utica, New York, concluded a three-year investigation of a marijuana distribution ring in February 2003. Inspectors arrested five suspects who were later indicted for trafficking in excess of 325 pounds of the illegal drug. The case was initiated by a Postal Police Officer in Los Angeles. Postal Inspectors were assisted by agents from the DEA and U.S. Immigration and Customs Enforcement in an Organized Crime Drug Enforcement Task Force case involving 12 companies that allegedly manufactured and distributed illegal drug paraphernalia. The two-year investigation resulted in the arrest of 55 suspects and the seizure of about $150,000 in cash. The suspects were reportedly responsible for generating revenue of more than $200 million via commercial businesses, the Internet, the U.S. Mail, and private mail couriers. A sentence of 18 years in jail was handed down on March 5, 2003, for a Rochester, New York, man who Postal Inspectors found had been running a multi-state heroin distribution ring. The six-year investigation identified seven of his co-conspirators, who have already received lengthy jail sentences. Ring members imported the heroin into the United States via international mail and distributed the drug and drug proceeds in this country via the U.S. Mail. Postal Inspectors in Houston joined federal, state, and local agencies from three states in an investigation of a ring that distributed PCP and cocaine. Gang members obtained the drugs in Los Angeles and transported them for sale in Oklahoma City and Minneapolis using the U.S. Mail or private couriers. Two New York men pled guilty in May 2003 to selling controlled substances over the Internet and shipping the drugs via the mail. Postal Inspectors were tipped off to suspicious Priority Mail by a postal clerk, who found liquid vials labeled "steroids" in a mailing that had broken open. Inspectors obtained search warrants for the package and found inside such illegal substances as anabolic steroids, Xanax, Vicodin, and Dinitrophenol (DNP). In September 2002, Inspectors learned that a 17-year-old Connecticut girl had died from an overdose of DNP she had purchased over the Internet. The drug had been shipped by one of the mailers, who was operating an Internet-based, illegal drug business. Instructions at the site advised customers to e-mail their orders and send cash payments via Priority or Express Mail to a defendant's home address, along with an e-mail address to confirm the order was sent. The men grossed about $30,000 a month and shared the profits equally. They will each receive sentences of one year to a year-and-a-half in prison. The government did not seek an upward departure from the sentencing guidelines in spite of the girl's death, but her parents began an aggressive letter-writing campaign on her behalf, and the judge may decide to increase the defendants' jail time as a result. In June 2003, the third of four defendants was sentenced in Knoxville, Tennessee, for mailing more than 100 parcels containing in excess of 100 kilos of marijuana over a two-year period. The four men had imported more than five kilograms of cocaine and 20 pounds of marijuana into the Knoxville area. Three were sentenced to a combined term of 21 years and nine months in prison, and sentencing for the fourth, who is the mailer, was scheduled for October 2003. Inspectors conducted a search of the mailer's home and seized 27 pounds of marijuana, 24 marijuana plants, $22,000 in cash, and 12 firearms. The investigation was conducted by the Postal Inspection Service, the DEA, and the Knoxville Police Department. Postal Inspectors arrested a Las Vegas, Nevada, man in June 2003 for distributing pseudoephedrine, a drug that can be used to manufacture methamphetamine. Before taking him into custody, Inspectors watched him pick up more than $11,000 from mail he received at a commercial mail receiving agency, and saw him mail 54,000 tablets at another CMRA. Inspectors began the multi-agency, international investigation after seizing 8,000 tablets mailed to a buyer in Missouri. They identified a Canadian man as the source for the Las Vegas drugs and obtained indictments for both suspects. A search warrant resulted in the seizure of 775 pounds of tablets-enough to produce 225 pounds of methamphetamine. Postal Inspectors coordinated the investigation with the Royal Canadian Mounted Police, who seized another 800 pounds of tablets. On the same day in June 2003, the Canadian man was arrested in England, prompting extradition proceedings. Postal Inspectors seized more than $300,000 from two bank accounts associated with the suspects and initiated additional forfeiture action that is expected to result in the seizure of $1.7 million in assets from drug proceeds. Asset Forfeiture and Money Laundering The Postal Inspection Service uses asset forfeiture laws to dismantle criminal organizations involved in drug trafficking, financial crimes, and child exploitation through the mail. Recent legislation, such as the Civil Asset Forfeiture Reform Act of 2000 (CAFRA) and the USA Patriot Act, has provided additional tools that are useful in investigating and prosecuting these offenses. In FY 2003, the Postal Inspection Service provided specialized forfeiture training to asset forfeiture personnel, Inspector-Attorneys, and field Inspectors. During FY 2003, Postal Inspectors seized 553 assets valued at $29 million, and forfeited 439 assets valued at more than $9.5 million. Inspection Service forfeiture activity in FY 2003 netted $6.7 million. As a result of successful asset forfeiture cases, the Inspection Service was able to share $1.6 million with other federal, state, and local law enforcement agencies. Postal Inspectors were also successful in seizing assets and using the proceeds to pay victim restitution. Money Laundering The U.S. Postal Service is considered a non-bank financial institution and a money services business, and must, therefore, 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. Immigration and Customs Enforcement 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. Case Files: Asset Forfeiture Postal Inspectors in Seattle, Washington, identified two suspects who were marketing illegal lottery products to U.S. citizens through the mail. The perpetrators collected an estimated $722,000 from unsuspecting victims and transported it between Vancouver, British Columbia, and Tacoma, Washington. Inspectors seized more than $400,000 from the suspects' bank accounts in November 2001, and on December 4, 2002, a consent judgment was issued for the forfeiture of $360,884. New York Postal Inspectors received a tip from a financial broker in November 2001 about suspicious money orders that had been deposited into an investment account. Inspectors found that the 431 postal money orders had been stolen by a New York City letter carrier, who controlled the account. Losses totaled more than $500,000. Inspectors executed seizure warrants during 2002 on all of the carrier's known accounts, recovering more than $380,000. Final forfeiture orders were obtained for the funds, which will be awarded as restitution to the U.S. Postal Service. From 1999 through 2002, Postal Inspectors in Los Angeles, California, and Tampa, Florida, identified several people for trafficking kilograms of cocaine and proceeds from the sales via Express Mail. After arresting one of the suspects, Inspectors seized and forfeited approximately $123,900 in drug proceeds. The defendant was convicted of drug trafficking and faces a possible sentence of life in prison. The investigation is continuing. Case Files: Money Laundering Two men pled guilty in October 2003 to a one-count information charging them with conspiracy to structure currency transactions. Inspectors learned that, over an eight-year period, the men structured the purchase of more than $600,000 worth of money orders, which they deposited into their attorney's trust account-a man who went on to become a Superior Court judge in New Jersey. The attorney pled guilty to his involvement in the scheme and resigned from the bench in February 2002. The two men face up to five years in prison and $250,000 in fines. A money laundering investigation by Postal Inspectors and FBI agents in Houston, Texas, culminated in the February 10, 2003, sentencing of a U.S. citizen from Nigeria. Postal Inspectors determined the man withdrew more than $400,000 from 12 fraudulent brokerage accounts, which contained deposits of stolen and counterfeit checks totaling $1.3 million. The man was sentenced to more than eight years in prison without parole and three years' supervised probation; he also was ordered to pay a $25,000 fine. Postal Inspectors, Secret Service agents, and investigators from the Franchise Tax Board (FTB) arrested an FTB employee on February 18, 2003, for opening at least 10 fraudulent bank accounts in other people's names. Using debit cards from the fraudulent accounts, the employee bought $65,000 worth of postal money orders, which he negotiated at post offices in California and New York. Investigators believe the employee stole approximately $950,000 worth of FTB checks. Postal Inspectors and IRS agents in New Jersey executed seizure warrants on March 7, 2003, for four investment brokerage accounts after finding that, from January 1998 through October 2001, the account holder had bought 599 postal money orders worth $416,280. He sometimes visited as many as six post offices a day, buying the money orders in amounts of less than $3,000 each to avoid federal reporting requirements. He deposited the laundered money into the investment accounts. Postal Inspectors who are members of the FBI's Joint Terrorism Task Force in Denver, Colorado, executed a search warrant in March 2003 on an Express Mail parcel addressed to an Iraqi national that contained $4,200 in blank postal money orders. The mailer and his brother ran an unlicensed money-transferring business, which they used to illegally send more than $7 million to Iraq over two and one-half years. Inspectors arrested the brothers for using the U.S. Mail and postal money orders to conduct illegal business. Identity Theft, Mail Fraud, Access- Device Fraud, and Stolen Mail Postal Inspectors and investigators with the Harris County, Texas, District Attorney's Office initiated an identity theft investigation after an Assistant District Attorney reported that someone had ordered and was using credit cards in her name. The team identified a suspect who was a naturalized U.S. citizen born in Lagos, Nigeria, and executed a search warrant at his home on March 7, 2003. Investigators seized thousands of pieces of stolen U.S. Mail and credit cards, and about $133,000 in cash from a safe. They also seized the suspect's two cars, a Mercedes and a Toyota. Four days later, the team served a search warrant at the suspect's bank, where they seized $230,000 in cash from a safety deposit box he rented. They located and froze his three bank accounts, resulting in a total seizure of more than $500,000, and arrested him on identity theft-related charges. The team identified the suspect's brother for similar violations, and arrested him on March 21 attempting to leave the country; they later seized $75,000 and a 2003 Lexus from him. On September 16, 2003, just minutes prior to a jury being seated, the suspect pled guilty to one count of conspiracy, eight counts of mail fraud, and one count of possessing stolen mail. Internal and External Investigations Mail Theft 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. When the process is interrupted by theft, rifling, obstruction, or destruction of the mail, investigative responsibility 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 690 million letters travel across the country and around the globe. The mail is delivered to about 150 million addresses six days of every week (with 1.8 million new addresses added every year). 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. More than 200 billion pieces of U.S. Mail are delivered yearly to 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 versions of ingenious, homemade mailboxes crafted to meet 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 or 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. U.S. Postal Inspectors deploy the best security technology available. They also use preventive tactics to help protect and educate postal employees and the public about mail theft. Volume Attacks The Postal Inspection Service devotes significant resources to preventing and investigating mail theft. Mail theft rings are its 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. Postal vehicles, collection and relay boxes, apartment mailbox panels, and neighborhood delivery and collection box units are commonly targeted by thieves in volume mail attacks. Volume mail attacks constitute an ongoing threat to postal customers and receive a high level of investigative attention. Case Files: Volume Attacks In October and November 2002, criminals attacked 11 two-ton postal vehicles in the Upper East Side of New York City, resulting in the loss of certified, registered, and Express Mail parcels. After Postal Inspectors acquired a video surveillance of four men attacking one of the vehicles and then fleeing in a van, they were able to identify and arrest one of the suspects in November. He is cooperating with Inspectors, and the investigation is continuing. Chicago Postal Inspectors and U.S. Secret Service agents from the Chicago Organized Crime Task Force arrested three suspects in April 2003 on outstanding federal warrants. The arrests stemmed from a two-and-a-half-year investigation into a criminal ring headed by one of the suspects. Ring members used checks stolen from the mail to manufacture counterfeit checks as part of a bank fraud scheme. The suspects also negotiated stolen U.S. Treasury checks and credit cards obtained via identity theft. Inspectors and other task force members arrested 47 other suspects on charges of theft or forgery in state court. One suspect provided counterfeit driver's licenses and credit cards to ring members. A consent search of his home, incident to his arrest, resulted in the seizure of numerous pieces of evidence, including an official postal key, a computer, a credit card encoder and embosser, thousands of blank credit cards, driver's licenses, a loaded handgun, printouts of guest information from a Chicago-area hotel (with thousands of customers' names, addresses, and credit card numbers), and a list of the gang's identity theft victims. The investigation is continuing. On June 17, 2003, Postal Inspectors in San Francisco held press conferences to announce the arrest of 139 mail thieves as the result of Operation Mail Safe. In one week, Inspectors and other agents fanned throughout San Francisco, San Jose, Sacramento, Fresno, Stockton, and Bakersfield to arrest mail theft and identity theft suspects. Similar operations took place in Honolulu, Maui, Reno, Phoenix, Albuquerque, and Salt Lake City, resulting in the arrests of 102 federal suspects and 37 state suspects. Operation Mail Safe received national media coverage, as well as extensive local coverage. Inspectors employed a number of prevention countermeasures to help protect citizens, including modified postal locks, new security locking bars, and new high-security centralized box units in areas of risk. The Postal Inspection Service also mailed more than 100,000 postcards with theft prevention tips to postal customers in the San Francisco Bay area. 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. When identity theft schemes involve the U.S. Mail, Postal Inspectors have investigative jurisdiction. 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. Mail Theft by Employees and Contractors U.S. 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. Case Files: Identity Theft New York Postal Inspectors and other members of the Nigerian Interagency Task Force initiated an identity theft investigation in early 2000 involving victims from Ohio, Michigan, and California. Task force members identified a suspect who had obtained stolen personal information from more than 21,000 credit reports and used it to open credit and bank accounts in victims' names. On October 29, 2002, the task force executed a search warrant at the home of the suspect and recovered several laptops, credit reports, and victims' personal information. They arrested the suspect and, on November 14, 2002, arrested a second man believed responsible for illegally accessing the Experian database to obtain thousands of credit reports. In June 2003, New Jersey Postal Inspectors, FBI agents, U.S. Secret Service agents, and local police detectives arrested 14 people and executed 20 search warrants in an identity theft investigation. The suspects allegedly stole information to fraudulently open credit card accounts, negotiate stolen checks, and lease luxury cars. Inspectors seized computers, electronic devices, and other hardware used to manufacture false IDs. Losses exceeded $10 million. A Chicago woman and her boyfriend used a mail bomb to murder her husband after fraudulently acquiring lines of credit in his name. She was found guilty after a three-week trial in February 2003 and was sentenced in May to 15 years in prison for conspiracy to commit identity theft, 10 years for access-device fraud, five years for mail theft, and life in prison for conspiracy in the bombing murder of her husband (to be served concurrently). She was also ordered to pay more than $142,942 in restitution and a $400,000 special assessment. Two other suspects are awaiting sentencing. On August 13, 2003, a federal grand jury in Louisiana returned an eight-count indictment against five Nigerians and an American for access-device fraud, ID fraud, and mail fraud. The group allegedly diverted dozens of credit cards to addresses they rented at commercial mail receiving agencies. Postal Inspectors recovered from the suspects handwritten pages with victims' names, addresses, dates of birth, Social Security numbers, and credit card numbers. Instructions on how to access credit card accounts online were also found. Case Files: Employee Mail Theft A letter carrier in Chicago was sentenced in July 2003 to six months' community confinement in a Salvation Army work-release center and three years' probation after pleading guilty to stealing U.S. Mail. Postal Inspectors arrested the now-former employee in December 2002, after they recovered 3,722 pieces of mail from him, including 225 rifled greeting cards. A rural letter carrier pled guilty in March 2003 to selling stolen postal keys. Postal Inspectors determined he had sold a stolen postal "arrow key" to a suspect and given him an official Postal Service shirt. Both the key and shirt were used to steal more than 200 pieces of mail from two apartment complex mailboxes in Florida. Postal Inspectors and Polk County, Florida, deputies arrested the rural carrier in October 2002, and he was sentenced in July 2003 to 60 days in prison and three years' supervised release. Case Files: Miscellaneous Crimes Postal Inspectors arrested a postal clerk in July 2003, who was a 38-year employee, after he brandished a cap pistol at the Ronald Reagan National Airport Mail Center. The man was charged with brandishing an object similar in appearance to a firearm, a violation of Virginia Code. He pled not guilty on September 3, 2003. Los Angeles Division Postal Inspectors arrested two men in July 2003 for passing stolen U.S. Treasury checks. The men allegedly deposited the checks into fraudulent bank accounts and laundered the proceeds by purchasing postal money orders with debit cards from the accounts. They recruited bank tellers to help them deposit 100 stolen checks worth $139,000 and low-level "runners" to cash the 43 money orders. Inspectors identified the two debit cards used to purchase the money orders, totaling $23,200, at post offices in Los Angeles and Van Nuys, California. To date, Bank of America has received $89,000 in reclamations from the U.S. Treasury Department for the fraudulently cashed checks. One of the suspects pled guilty in August 2003. New York Postal Inspectors discovered in December 2002 that 72 counterfeit postal money orders totaling $50,400 had been cashed. All were from a bogus company and were made payable to 12 people in Brooklyn and Connecticut. More counterfeit money orders, worth more than $400,000, began appearing in Brooklyn, and Inspectors noted similarities between the two groups. They identified several women who admitted they were being paid to open bank accounts and pass along the associated ATM and PIN numbers. Inspectors arrested three suspects on charges of bank fraud. Postal Inspectors investigating the theft of money orders at the Beverly, Letcher, and Line Fork Post Offices in Kentucky identified the suspects' vehicle when they attempted to cash the money orders. The suspects wrecked a stolen car in April 2003 after flee- ing Kentucky State Troopers, who arrested them. The two suspects admitted stealing the money orders, as well as mail in local mailboxes, while looking for checking account information. Prosecution is pending. Boston Postal Inspectors Bust Credit Card Ring Postal Inspectors in Boston initiated a case on June 3, 2002, involving 57 Discover credit cards that were stolen from the U.S. Mail en route to New Jersey. After tracing the cards to cash advances made in Connecticut, Rhode Island, and New York, Inspectors captured an image of a suspect on a surveillance video. The man used at least 20 stolen credit cards to make cash advances in excess of $300,000. Two weeks later, a woman used a stolen Discover credit card and a fraudulent New Jersey driver's license to get a $3,000 cash advance at the North Community Bank in East Granby, Connecticut. She then visited another North Community Bank in Granby and tried the same tactic, but with a different (also stolen) Discover card. Because Postal Inspectors had alerted the bank about the stolen cards, the manager called local police, who arrested the woman on the spot. Postal Inspectors interviewed her and showed her a photo spread that included their first suspect, whom she identified as a Nigerian national. Inspectors then obtained a federal arrest warrant for the Nigerian on charges of access-device fraud. Postal Inspectors from Boston, New York, and New Jersey, with agents from the Secret Service and New York Police Department, executed a search warrant in Brooklyn in October 2002 at the residence of the Nigerian man. The team seized stolen credit cards, checks, and credit card numbers, plus fraudulent driver's licenses from three states-each with the man's photo-and arrested him. The suspect identified several co-conspirators and admitted the stolen cards came from two other Nigerians. Inspectors arrested a Jamaican man in March 2003 in New Haven and arrested one of the Nigerian suspects in July 2003 in Brooklyn. Inspectors learned the stolen cards came from suspects in New Jersey, Brooklyn, and Staten Island. Postal Inspectors from Connecticut, New York, and New Jersey and other members of the Interagency Nigerian Organized Crime Task Force arrested another Nigerian co-conspirator in July 2003 and seized from him stolen credit cards, credit card numbers, Social Security numbers, and dates of birth, as well as credit bureau printouts and a bag of shredded credit cards, driver's licenses, credit card inserts, and mailing envelopes. On July 23, 2003, District of Connecticut Magistrate Judge Margolis ordered the suspect held without bond. The investigation is continuing. A Virginia highway contract route driver pled guilty on November 21, 2002, to five criminal counts stemming from a complaint about large amounts of mail on his property. The driver-a former deputy sheriff-was responsible for preparing and delivering mail to five post offices in southeastern Virginia. Washington Division Postal Inspectors executed a search warrant at the contractor's home and found mail filling three abandoned vehicles, pits filled with mail in the surrounding woods, and piles of mail beneath his mobile home. The mostly First-Class and standard bulk business mail dated back about 10 years, through May 2002, and Inspectors needed three, nine-ton postal vehicles to transport it from the property. The driver admitted he had taken the mail home and rifled it for money and other articles. He pled guilty to five felony counts of theft of mail by a postal employee and was sentenced on March 6, 2003, to three years in prison. In June 2003, Netflix, Inc., a major retailer that rents DVDs via the U.S. Mail, asked Los Angeles Postal Inspectors for help when it encountered problems with mail theft. Inspectors tracked the cause to four Netflix employees who worked in the mailroom and an outside co-conspirator, who together were believed to have stolen more than 1,000 DVDs-plus another 403 on the day of their arrests. The employees opened the DVDs in the mailroom and placed them in the trash, then paid a collaborator to pick them up from Netflix's outside garbage dumpsters. They sold the stolen DVDs for $2 to $3 each. The employees lost their jobs, and prosecution is pending. A Postal Inspector arrested a Postal Service custodian from the Roy Royall Station in Houston, Texas, in February 2003. After Inspectors analyzed postal records and conducted a surveillance of the employee, they found he had been stealing gas credit cards from the station and using them to sell discounted gas to dump truck drivers. Losses exceeded $54,000. He lost his job with the Postal Service, and prosecution is pending. Homicides, Assaults, and Threats The U.S. Postal Inspection Service is committed to ensuring employee safety in the workplace. Postal Inspectors investigated 845 postal-related assaults and credible threats during FY 2003 and made 356 arrests. Inspectors seek prosecution in assault cases when appropriate. Graph Assaults & Threats: Five-Year Trend FY 99: 1,063 FY 00: 1,037 FY 01: 714 FY 02: 799 FY 03: 845 Case Files: Homicides, Assaults, and Threats A man who entered the lobby of the Lakeside, California, Post Office on May 28, 2003, and took four postal employees hostage at gunpoint was charged with kidnapping with the use of a firearm. He carried an SKS assault rifle and a backpack with more than 200 rounds of ammunition. The suspect demanded to speak with the San Diego district manager's office, and hostages were then able to speak with Postal Inspectors who had responded to that office. Hostage negotiators from the local sheriff's office spoke with the suspect via a cell phone and finally convinced him to release the four employees. The incident lasted about four hours, and no employees suffered physical injuries. The Postal Inspection Service held a press conference on December 23, 2003, the six-month anniversary of the murder of a full-time letter carrier in Pittsburgh, Pennsylvania. The press conference was held at the site where the carrier was shot and killed after he stepped outside his marked postal vehicle, which was parked at the Crafton-Ingram Shopping Center on June 23, 2003. The Postal Inspection Service initiated the event to reinforce its commitment to solving the case, and Inspectors used the opportunity to distribute an updated version of a reward poster, offering up to $100,000 for information leading to the arrest and conviction of the person or persons responsible for the murder. Postal Inspectors and officers from the Allegheny County Police Department are conducting the investigation. Postal Inspectors investigated the murder of an employee of Earl's True Value Hardware store in Fredericksburg, Virginia, who was found dead on July 14, 2003, in a contract postal unit in the store. Postal Inspectors, FBI agents, and members of the Stafford County Sheriff's Office responded to the scene. The employee was completing "close-out" duties when she was attacked, but there were no eyewitnesses to the crime. Postal Inspectors and other members of the Homicide Task Force identified a suspect through evidence recovered from the crime scene, and arrested him on September 13, 2003, after executing a search warrant at his home. He is being held without bond, and further prosecution is pending. A man convicted in 1981 of murdering a postal contractor in Eatonville, Florida, in October 1979 was executed at the Florida State Prison on December 9, 2002, after numerous postponements. Linroy Bottoson abducted Catherine Alexander from a contract postal station after imprinting 37 postal money orders for what was then the maximum amount allowable of $400 each. Postal Inspectors found Alexander with 16 stab wounds and severe injuries that resulted from being run over by a vehicle multiple times. In this aerial photo, some of the 100 or so local, state, and federal officials can be seen during the kidnapping of a letter carrier in Miami, Florida, on January 31, 2003. Postal Inspectors responded to the scene after a report that an unidentified male had jumped into a postal mail truck at NW 185th Street and 39 Court. Inspectors positioned their car four vehicles behind the postal truck in pursuit of the hijacker. During the slow-speed chase, the suspect fired two shots, one from a .357 Magnum and the other from a .380 Baikal pistol, but, fortunately, missed both the police and Inspectors on his trail. Four hours later, the suspect released the carrier, who was unharmed; the suspect surrendered an hour later. After a one-week trial, the jury took only an hour to find the man guilty. He was sentenced on August 5, 2003, to three consecutive terms of life in prison. A co-conspirator, who had been observed near the vehicle, was also arrested and later received a six-year prison term and five years' probation. Robberies and Burglaries 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 employees and facilities against criminals. But the U.S. Mail and post offices will likely 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. At top is a chart that provides statistics on robberies that occurred in the past two fiscal years; above is a graph depicting five-year robbery trends. Postal Inspectors attribute the drop in the number of robberies that occurred during FY 2003 to recent prevention strategies and countermeasures, such as installing locks, lighting, or surveillance cameras at facilities as needed, as well as talking with postal employees and emphasizing robbery prevention tips whenever possible. Inspectors aggressively and thoroughly investigate all postal robberies and attempted robberies. Graph Robberies in FY 2002 and FY 2003 Facility robberies with physical injury in FY 02 - 3 Facility robberies with physical injury in FY 03 - 7 Carrier robberies with physical injury in FY 02 - 3 Carrier robberies with physical injury in FY 03 - 3 Other robberies with physical injury in FY 02 - 0 Other robberies with physical injury in FY 03 - 1 Total robberies with physical injury in FY 02 - 6 Total robberies with physical injury in FY 03 - 11 Facility robberies with death in FY 02 - 0 Facility robberies with death in FY 03 - 2 Carrier robberies with death in FY 02 - 0 Carrier robberies with death in FY 03 - 0 Other robberies with death in FY 02 - 0 Other robberies with death in FY 03 - 0 Total robberies with death in FY 02 - 0 Total robberies with death in FY 03 - 2 Facility robberies without physical injury in FY 02 - 41 Facility robberies without physical injury in FY 03 - 28 Carrier robberies without physical injury in FY 02 - 22 Carrier robberies without physical injury in FY 03 - 9 Other robberies without physical injury in FY 02 - 30 Other robberies without physical injury in FY 03 - 19 Total robberies without physical injury in FY 02 - 93 Total robberies without physical injury in FY 03 - 56 Total facility robberies in FY 02 - 44 Total facility robberies in FY 03 - 37 Total carrier robberies in FY 02 - 25 Total carrier robberies in FY 03 - 12 Total other robberies in FY 02 - 30 Total other robberies in FY 03 - 20 Total robberies in FY 02 - 99 Total robberies in FY 03 - 69 Graph Robberies: Five-Year Trend FY 99: 130 FY 00: 116 FY 01: 89 FY 02: 99 FY 03: 69 Burglaries The U.S. Postal Inspection Service continued its investigations of burglaries during FY 2003, although rates remained relatively stable. A few problems remained in rural areas of the country. About 81 percent of the burglaries in FY 2003 resulted in losses of less than $1,000, or the theft of fewer than 100 postal money orders. The graph above depicts postal burglary trends over the past five fiscal years. Graph Burglaries: Five-Year Trend FY 99: 291 FY 00: 294 FY 01: 286 FY 02: 212 FY 03: 256 Case Files: Robberies Postal Inspectors arrested a full-time distribution clerk at the West Jersey Processing and Distribution Center (P&DC) in Whippany, New Jersey, on October 23, 2002, for bank robbery. Inspectors and FBI agents identified the suspect's latent fingerprints on bank notes he used while committing four bank robberies in New Jersey. An Automated Fingerprint Identification System "hit" was obtained on the employee, and he was arrested without incident at his home in East Orange. The investigation linked the employee to 27 bank robberies in five states since 1998. He was sentenced in August 2003 to 13 years in prison and was ordered to pay restitution of $105,000. An investigation by Washington Division Postal Inspectors and members of the Baltimore, Maryland, Police Department led to the March 2003 indictment of three men for the December 20, 2002, robbery of the Govan's Station Post Office in Baltimore and the January 3, 2003, robbery of a McDonald's restaurant. The men were charged in a six-count indictment with conspiracy to assault with intent to rob, use of a firearm during the commission of a robbery, and violations of the Hobbs Act for obstructing and affecting interstate commerce by robbery. The three men were sentenced on October 16, 2003. One man received an eight-year jail term and the other two were each sentenced to 11 years in prison. Two West Virginia men pled guilty on July 17, 2003, for their part in the armed robbery of a highway contract route (HCR) driver at the Sissonville, West Virginia, Post Office. In February 2000, a man brandishing a gun approached the HCR driver at the rear dock of the post office. As he tied the driver's hands, an accomplice entered the truck. A clerk inside the post office (which had been properly secured) called 911 while the men made several attempts to enter the building. Postal Inspectors identified a postal clerk as a suspect, and arrested three others believed to be involved in the robbery. The first suspect was sentenced in August 2003 to more than 10 years in prison and three years' supervised release, and was ordered to pay $75,241 in restitution to the U.S. Postal Service. The second suspect was sentenced in October 2003 to more than five years in prison and five years of supervised release, and was ordered to pay $32,246 in restitution. The third suspect was also sentenced in October to 12 years in prison and five years of supervised release, and was ordered to pay $75,241 in restitution. Another man was previously sentenced for his role in the crime. Postal Inspectors identified four people suspected in the attempted hijacking of a North Carolina HCR driver. The driver was traveling between post offices on September 10, 2002, when a suspect on a motorcycle alerted three accomplices. One man blocked the highway with his BMW while two others emerged from nearby woods. In a harrowing escape, the HCR driver crouched down in his seat and accelerated around the BMW as shotgun blasts hit his truck. Postal Inspectors identified the suspects and, with the assistance of local sheriff's deputies, arrested all four in April 2003. One of the suspects was a former HCR driver who had alleged he was the victim of a hijacking in January 2002. Two suspects pled guilty on September 24, 2003, to conspiracy and firearm charges. Prosecution is pending for other suspects identified by Postal Inspectors. Case Files: Burglaries Charlotte Division Postal Inspec-tors and Smith County, Tennessee, detectives arrested a man and a woman on April 11, 2003, as they were attempting to negotiate "bait" postal money orders stolen that day during the burglary of the Hickman, Tennessee, Post Office. The couple pried open a locked window and entered the service window area, but were unable to break into the safe. They pled guilty one week later to burglarizing the post office, as well as two local businesses, and were each sentenced to two years of probation. On May 19, 2003, San Francisco Division Postal Inspectors arrested a man in the act of burglarizing the Cedar Station Post Office in Fresno, California. Inspectors initiated the investigation after receiving customer complaints about missing parcels. A video surveillance of the office yielded images of two men stealing parcels on different nights. Inspectors then conducted a surveillance of the office and saw a man using a key to enter the facility and begin filling a duffle bag with mail parcels. After his arrest, the man admitted he had burglarized the post office at least 12 times in the past six months, using a key he got from his former wife, who was a full-time custodian. Postal Inspectors have identified a second suspect, and the investigation is continuing. St. Louis Division Postal Inspectors arrested two men in June 2003, one of whom was already incarcerated at the Iowa State Penitentiary. The men were charged with burglary, receiving stolen government property, and possessing stolen money orders related to the June 16, 2001, burglary of the St. Catherine Contract Postal Unit in St. Paul, Minnesota. The safe containing postal money orders and the money order imprinter was also taken. One of the suspects pled guilty in July 2003 to possessing a stolen money order, and the other pled guilty in August 2003 to the burglary. Inspectors arrested three other suspects for cashing more than $22,000 in money orders stolen during the break-in. Revenue and Financial Investigations Postal Inspectors determine which products and sources of revenue pose the highest financial risks 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 who use metered postage and those who 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 below left summarizes Postal Inspection Service revenue investigations this past fiscal year. U.S. Postal Inspectors concluded eight major investigations in FY 2003 involving the underpayment of postage by large-scale, commercial mailers. Postage fraud schemes are generally complex due to the many postal operations and postage rate structures, and can pose a problem for prosecutors trying to present the case to a jury. Graph Revenue Investigation Results in FY 2003 Criminal cases: 113 Criminal convictions*: 54 Civil cases resolved*: 9 Amount ordered or agreed to be paid as a result of a civil prosecutive action*: $8.8 million Voluntary restitution*: none Court-ordered restitution-criminal*: $11.9 million *May be related to cases from prior reporting periods. Civil Prosecutions Affirmative Civil Enforcement (ACE) is an effective tool used by investigative agencies and criminal prosecutors to ensure the fullest recovery of losses for the government. ACE allows the government to fashion settlements to address unique law enforcement issues that can arise in complicated fraud cases. ACE also grants triple damages and penalties for false claims. Financial Investigations The majority of financial investigations conducted by the U.S. Postal Inspection Service comprise employee embezzlements. Postal Inspectors have uncovered a range of embezzlement schemes used 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 572 embezzlement investigations during FY 2003 and identified more than $5.4 million in postal losses. Case Files: Revenue Investigations A Colorado mailer signed a $2.4 million settlement agreement on July 23, 2003, as the result of intentionally underpaying postage. Although the Salida Post Office was only two blocks from the mailer's business, Postal Inspectors found the company had been taking its large mailings to an office 13 miles away. That office, which was not equipped to handle large mailings, accepted the mail at incorrect, lower postage rates and then transported it by truck to the Salida Post Office. The mailer actually had sophisticated software to compute the correct postage, but continued to exploit the situation at the remote office. Approximately 8 million pieces of underpaid mail were processed through the office. Postal Inspectors are reviewing operating procedures at the small office. A Norcross, Georgia, man who Postal Inspectors alleged had manipulated postal vending machines was sentenced on April 24, 2003, to 27 months in prison and was ordered to pay $3,700 in restitution. The man altered pennies so they would be accepted as dimes in postal vending machines. After depositing 200 altered pennies into postal machines, which "read" them as being worth $20, he would select the lowest-priced stamp items, allowing him to receive the maximum amount of change in dollar coins. Inspectors estimated he had deposited approximately 154,000 of the altered pennies into the machines. A man in Lewisville, Texas, who owned a third-party mailing business, was sentenced on May 16, 2003, to 27 months in prison and three years of supervised release, and was ordered to pay approximately $66,000 in restitution to his victims. An investigation by Postal Inspectors and agents from the FBI found the owner had overbilled customers by more than $100,000 by using a stolen post office dater to create fictitious postage statements as proofs of mailings. The man also obtained loans and credit cards, via the U.S. Mail, in the name of one of his business partners, resulting in charges of mail fraud. A New York interstate truck driver was sentenced on January 9, 2003, to one year in prison and three years of supervised release, and was ordered to pay full restitution of $17,840 to the Postal Service for writing bad checks at post offices. Postal Inspectors determined the driver was a member of a gang that wrote bad checks to buy stamps, which they would turn over to the ringleader in return for 50 percent of the stamps' value. The ringleader resold the stamps and pocketed the cash. Inspectors arrested seven co-conspirators. Four others have already been sentenced and were ordered to pay a combined $38,069 in restitution. Another suspect is awaiting trial. Case Files: Civil Prosecutions As the result of a seven-year investigation by Postal Inspectors, the U.S. Attorney's Office in New Jersey filed a civil complaint against a Carlstadt company. The company had presented 21 fraudulent checks to cover more than $652,000 worth of mailings. Postal Inspectors determined the company knew it had insufficient funds to back the checks. In March 2003, the judge ordered the company to pay the Postal Service triple damages of nearly $2 million, and $210,000 in penalties, as provided by ACE. A publisher in Jamesburg, New Jersey, signed a $3.7 million settlement agreement on July 3, 2003, in lieu of a civil trial. Postal Inspectors determined the publisher had been submitting false mailing documents for three years. The deception allowed him to pay lower postage for 10 of his publications. The settlement represented nearly double the revenue the publisher owed the Postal Service. Case Files: Financial Investigations A former postal manager of the Longworth House Office Building Station for the U.S. House of Representatives was sentenced on June 26, 2003, to 14 months in prison and three years of probation, and was ordered to pay $199,620 in restitution for stealing p